Float × SOFR × (1 − Coinbase share).
Three numbers determine almost everything. The third — Coinbase — is the structural problem the deck is built around.
How Circle actually makes a dollar
A formula a five-year-old can use
Plug in: $77B × 3.5% × 50% ≈ $1.35B of net reserve income on the current run-rate. Q1'26 annualises to $2.6-2.8B in total revenue & reserve income (gross of distribution), which the company nets down via the $407M/qtr distribution cost line.
Why Coinbase concentration is structural, not stylistic
Three independent analysts converged on the same number: $908M of $1.01B in FY24 distribution costs went to Coinbase = 90% of partner spend = ~54¢ of every revenue dollar.
Coinbase keeps 100% of yield on USDC sitting on Coinbase plus 50% of residual everywhere else, AND has veto rights over new Circle partnerships. Coinbase's wallet share has compounded 5% → 12% → 20% → 22%+ — meaning a growing slice of the float earns Circle exactly $0.
competitor / supply-chain / customer / financialCoinbase wallet share — the curve that is the thesis
The 4x in three years
The cost line grew faster than revenue during 2022-2025. When Circle wanted to bring Binance into the tent (Dec 2024), Coinbase had to agree — and reportedly traded some of its own residual share to make the deal work. Circle had to pay Binance $60.25M up-front plus monthly incentives gated on Binance holding ≥1.5B USDC.
Net read: Circle is a margin-takers' margin-taker. The reserve-yield rents are real but the gatekeepers between Circle and the float (Coinbase first, Binance second, every L1/L2 ecosystem participant after) have meaningfully more bargaining power than Circle does.
supply-chain.md · §Pass-Through PowerFloat × SOFR — Circle-retained reserve income, $M
Net of the ~50% distribution split. Other revenue / Arc not included; opex not subtracted. "The asymmetry here is telling: the bull case requires both float growth AND rate persistence; the bear case requires only one to fail."
| SOFR scenario | Float = $60B | Float = $77B (today) | Float = $120B | Float = $200B |
|---|---|---|---|---|
| 5.25% 2024 peak / "debt-spiral premium" | $1,575 | $2,021 | $3,150 | $5,250 |
| 4.0% higher-for-longer | $1,200 | $1,540 | $2,400 | $4,000 |
| 3.5% today — current realised | $1,050 | $1,348 | $2,100 | $3,500 |
| 2.5% soft-landing base / Fed dot plot 2027 end | $750 | $963 | $1,500 | $2,500 |
| 1.5% aggressive cuts (mild recession) | $450 | $578 | $900 | $1,500 |
| 0.5% ZIRP redux | $150 | $193 | $300 | $500 |
$200B float × 3.5% SOFR
~$2.65B operating profit → ~$2B net income → ~10x P/E on today's market cap. ~3x stock if multiple holds.
$120B float × 2.5% SOFR
~$1.0B operating profit → ~$750M net → ~43x P/E. Fair-to-rich.
$100B float × 1.5% SOFR
Net income collapses to $200-300M → 100x+ P/E. Stock cut in half. ZIRP + bad CB + bank consortium = 80%+ downside.