Circle (CRCL), Stock Price Plummets 13% in 5 Days... Will it Collapse Under OpenUSD's Offensive?

▲ Circle (CRCL), USDC, Open USD, Stablecoin/AI Generated Image

Circle is facing a test to defend its stablecoin leadership with the emergence of OpenUSD (OUSD). As major financial and payment companies like Visa, Mastercard, American Express, BlackRock, and Coinbase throw their weight behind the new stablecoin, concerns are growing that USDC's market position could be shaken.

According to crypto news outlet Cryptopotato on July 2 (local time), observations about OpenUSD's potential impact on USDC spread throughout the market after its announcement. As a result, Circle's stock price has fallen by approximately 12.7% over the past five trading days. The outlet reported that while existing players still dominate most of the stablecoin market, industry experts predict that OpenUSD could significantly alter the competitive landscape.

Alex Witt, General Partner at Verda Ventures, stated in an interview with the outlet that "distribution is king." He explained that value would accrue to operators with built-in distribution networks. Witt pointed out that unlike Tether, Circle does not directly own core distribution channels, citing Circle's structure of sharing 90% of its USDC reserve revenue with Hyperliquid as evidence of its weak competitive position. He assessed that OpenUSD could significantly undermine Circle's first-mover advantage.

Bernardo Brites, Co-founder and CEO of Trace Finance, described OpenUSD as a "real structural disruption" in the stablecoin market. He explained that the market perceived the OpenUSD announcement as a direct threat to Circle. However, he added that challenges such as securing liquidity from scratch, a lack of trading pairs with major cryptocurrencies, governance friction arising from coordinating multiple stakeholders, and a thin fee structure are cited as execution risks.

Nevertheless, Brites viewed the OpenUSD consortium as larger than the USDG consortium issued by Paxos. He stated, "It's unprecedented for major card networks, payment processors like Adyen, and banks like BNY and Cross River to stand behind a single stablecoin." He further assessed that securing a distribution network has been the most challenging issue in the stablecoin market, and OpenUSD starts with a larger distribution base than any other issuer.

Circle CEO Jeremy Allaire refuted the optimism surrounding OpenUSD. Allaire stated that stablecoin networks are platform and network effect businesses, tending toward a winner-take-most structure. He emphasized that building a network over many years is more crucial than a new consortium. He also pointed out that a model that shares all revenue depletes infrastructure, and the track record of consortium products achieving scale, market fit, and product agility has been very poor. Allaire expects the partnership with Coinbase to remain strong and that many OpenUSD founding members will continue to be USDC partners and customers.

[Article Summary]

-OpenUSD has challenged USDC, backed by major financial and payment companies including Visa, Mastercard, American Express, BlackRock, and Coinbase.

-Experts highlighted OpenUSD's distribution network as a strength but also pointed to securing liquidity, lack of trading pairs, governance friction, and fee structure as execution risks.

-Circle CEO Jeremy Allaire countered that long-standing network effects and the ability to maintain infrastructure are more important than new consortia in the stablecoin market.

*Disclaimer: This article is for informational purposes only and does not constitute investment advice. We are not responsible for any investment losses based on this content. The information should be interpreted solely for informational purposes.*