Thanks to the blistering rise of cryptocurrencies, Wall Street has steadily embraced the emerging digital asset class. One of the latest examples is the initial public offering of Circle Internet Group Inc (NYSE:CRCL), a global financial technology (fintech) company and a market leader in stablecoins or cryptos pegged to a fiat currency. Circle is most notable for issuing USD Coin (CCC: USDC/USD), which is pegged on a one-to-one basis with the greenback.
Recently, the stablecoin issuer disclosed its financial results for the second quarter. Revenue landed at $658.08 million, representing a massive lift over Wall Street analysts' consensus target of $540.02 million. On the bottom line, Circle did incur a loss per share of 43 cents, representing a negative surprise of 38.71% relative to the expected loss of 31 cents per share.
Still, investors greeted the disclosure with enthusiasm, with CRCL stock rising 1.27% in the Aug. 12 session. So far this year, CRCL is up nearly double from its first day of trading. Looking deeper at the results, investors likely responded to several positive metrics, which demonstrated strong network growth, rising circulation of the USDC stablecoin and expanding revenue:
- USDC on-chain transaction volume up 5.4 times on a year-over-year basis to $5.9 trillion.
- USDC in circulation jumped 90% year-over-year to over $61 billion.
- Total revenue and reserve income increased by 53% year-over-year to $658 million.
- Adjusted EBITDA up 52% year-over-year to $126 million, with 38% revenue less distribution costs (RLDC) margin.
Furthermore, the GENIUS Act — signed into law by President Donald Trump in July — offers political cover for the USD Coin. Essentially, the bill (which unexpectedly featured cross-party backing) establishes a regulatory framework for stablecoins. Even better, as Circle itself claimed on its second-quarter earnings presentation, "payment stablecoins like USDC are not a security and reserves are bankruptcy remote."
To be fair, there are risk factors to consider. One of the biggest is that USDC competes head-to-head with Tether (CCC: USDT/USD), which may present challenges to market share. Another potential headwind is the regulatory uncertainty abroad. While clarity in the U.S. is improving, foreign jurisdictions could impose restrictions, especially as Circle expands cross-border payment corridors.
Still, the overall environment appears conducive for additional retail interest in the crypto space. According to CoinMarketCap, the total market capitalization of all cryptos exceeds $4.1 trillion. Therefore, USDC — along with Circle Internet Group — may be ideally positioned.
The RexShares ETF: While betting on CRCL stock may be an intriguing prospect for speculators, those seeking an additional kick would ordinarily be forced to acquire highly complex financial vehicles. However, financial services giant RexShares provides an alternative arrangement: a leveraged exchange-traded fund.
Recently making its debut, the T REX 2X Long CRCL Daily Target ETF (BATS:CCUP) seeks to track the daily investment results of CRCL stock but magnified; specifically, 200% of the daily performance of the namesake equity.
A key attribute of ReShares ETFs is intuitive accessibility. In most cases, investors who are interested in dialing up their risk exposure via leverage must engage the options market. However, financial derivatives carry complexities that may not be suitable for all market participants. Fortunately, RexShares ETFs can be bought and sold just like any other publicly traded security, thereby reducing the acuteness of the learning curve.
Still, prospective participants must familiarize themselves with the unique risks associated with specialized financial vehicles. First, leveraged ETFs typically incur greater volatility than funds tracking benchmark indices, such as the S&P 500. Second, RexShares makes it clear that its products are not primarily designed for holding periods lasting longer than one trading session. Going beyond the recommended period may expose investors to value decay due to the daily compounding effect.
The CCUP ETF: Having just made its public market debut, there's not much trading data available for the CCUP ETF. Currently, the fund is down 4.42% since its launch.
- During the pre-market session of Aug. 13, the CCUP ETF has experienced volatility due to a public offering of 10 million shares.
- However, those with a broader perspective may consider recent options trading activity, which may indicate bullish intent among institutional or professional investors.
Featured image by Gerd Altmann on Pixabay.
