Dragonfly Investor: Interest Rate Cuts Would Be Disastrous for Circle, Leading to Sharp Declines in Revenue and Profit

According to ChainCatcher, Dragonfly investor Omar commented on X regarding interest rate cuts: “Rate cuts are nothing short of disastrous for interest rate-sensitive companies like Circle: a 100 basis point cut would reduce annualized total revenue by $618 million, shrink gross profit by $303 million, and lower profit margins by 3.3 percentage points. In terms of valuation, this would push the already high 42x EV/annualized gross profit multiple up to 60.4x (a premium of about 50%).”

To offset the impact, Circle would need to increase USDC circulation by $28 billion (equivalent to 44% of its current $64 billion scale) just to maintain the status quo. With rate cuts now a foregone conclusion, this explains why there was a massive $1.5 billion stock sell-off yesterday, and also reveals why Circle is eager to push new products that can monetize transaction flows (CPN and Circle Chain).”