Coinbase is reportedly assessing its participation in a newly launched stablecoin platform backed by major financial players Stripe, Mastercard, and Visa. The news has triggered a decline in stock prices for Coinbase Global (COIN) and Circle Internet Group (CRCL), with CRCL experiencing a sharper drop.
At the market open, Circle’s stock fell nearly 4%, while Coinbase’s shares decreased by 1.4%, amidst broader cryptocurrency market turbulence. Bitcoin, for instance, struggled to maintain its price above $67,000 after experiencing a significant liquidation wave totaling $1.8 billion, leading to an intraday low around $65,000. As of the latest updates, Bitcoin’s price hovered at approximately $66,800, reflecting a 2.8% decline in the past 24 hours.
Retail investor sentiment on platforms like Stocktwits has taken a bearish turn for both Circle and Coinbase in recent days. Notably, discussions around Circle surged 40% as concerns and speculation about stablecoin adoption and regulatory developments, particularly the anticipated CLARITY Act, have been rising. Over the past month, message volumes concerning both companies have skyrocketed by more than 150%.
Circle’s business model is notably sensitive to the circulation of its stablecoin, USDC, which contributes significantly to its revenue. In fact, reserve income generated on USDC assets is projected to drive $2.64 billion of Circle’s revenue by 2025. The introduction of an independent stablecoin platform from Stripe, Visa, and Mastercard poses a potential threat to USDC’s market share, possibly diverting trading volume away from Circle’s offerings.
Shares of Visa and Mastercard also faced pressure in early trading, with both companies’ stocks declining over 2%. However, retail sentiment on Stocktwits showed a divergence between the two, as Visa’s sentiment leaned bearish while Mastercard’s shifted to extremely bullish.
A key element of concern for Coinbase is the upcoming renewal of its revenue-sharing agreement with Circle, originally established in 2023. The existing terms allow Coinbase to retain all interest income from USDC held on its platform while splitting the revenue from USDC transactions elsewhere evenly with Circle. The outcome of this agreement could have significant implications for Coinbase’s revenue structure as they navigate potential competitive threats from the new stablecoin platform.
