Analysis: Circle generates 98% of its revenue from reserve assets, faces addressable market competition from large institutions

After the listing of stablecoin issuer Circle in the United States, its profit model was revealed, which showed that 98% of the company's revenue last year came from the ROI of reserve assets. Usually, reserves need to be high-quality, short-term and highly liquid assets, but the data provided by Circle shows that the yield of its reserve assets in the past three years has ranged from 0.14% to 5.17%, indicating that its income momentum at this stage is quite focused on the interest rate trend of short-term bonds and other assets.
In addition, Circle also faces a potential market competition risk, namely: once a sovereign-level institution participates in the issuance of stablecoins in the future, it may quickly gain a certain market share by virtue of the advantage of "zero counterparty risk". Analysts believe that Circle needs to expand its crypto ecosystem.