Castellan Capital — London

Institutional research on digital assets and equities.

Independent, evidence-based publications for professional and qualifying investors.

Circle Internet Group (CRCL)

LATEST

The June 30 OUSD selloff wiped 17.5% from Circle in a single session — compounded by Russell index reconstitution. We argue this is a sentiment event, not a fundamental reset, and initiate with a Buy at $68.34 and a $142 price target.

Read article ↓ ↓ Download PDF
RatingBUY
Entry Price$68.34
Price Target$142.00
Upside+108%
Market Cap~$16.1B
Next Catalyst18 Aug 2026

Investment Thesis

Circle Internet Group is the world's first and only publicly traded pure-play stablecoin infrastructure company. At $68.34 — precisely its June 2025 IPO opening-day price — the stock has given back thirteen months of fundamental progress: FY2025 revenue +64% to $2.7 billion, USDC onchain transaction volume +263% year-on-year in Q1 2026, and a $222M Arc blockchain raise backed by BlackRock, Apollo and Andreessen Horowitz at a $3 billion valuation.

Three things compressed the stock from its $299 all-time high. First, Federal Reserve cuts reducing the reserve return rate from 4.2% to 3.5% — though volume growth has consistently more than compensated. Second, the Coinbase revenue-sharing agreement, which routes roughly $900M per year to Coinbase but expires for renegotiation in August 2026 under a regulatory backdrop that has materially shifted bargaining power toward Circle. Third, the June 30 OUSD announcement — which we address directly below.

The OUSD Selloff — Our Overreaction Thesis

On 30 June 2026, Open Standard — a consortium of 140+ companies including Visa, Mastercard, Stripe, BlackRock, Coinbase, and Google — announced Open USD (OUSD), a stablecoin designed to return nearly all reserve income to its partner network. CRCL fell 17.55% in a single session, compounded by simultaneous removal from FTSE Russell growth indexes. We believe this is a material overreaction for six reasons:

"OUSD has not yet launched. It has no live supply. Its closest structural precedent — Paxos USDG, a consortium stablecoin with a similar yield-sharing model launched 18 months ago — has reached only $3 billion in supply versus USDC's $73 billion. For OUSD to threaten USDC's base within two years, it would need to grow at 25× that pace. No consortium stablecoin in history has achieved anything close to this trajectory."
  • The USDG precedent. The closest live comparable reached $3B in 18 months vs USDC's $73B. OUSD would need 25× faster growth to threaten the base within two years — no precedent supports this.
  • Logo membership is not live integration. ARK Invest: "Putting your name on a list is easy. Changing corporate behaviour is hard." Meta's Libra assembled a larger backer list in 2019 and never launched at scale.
  • OUSD's zero-fee model may not be sustainable. Circle CEO Allaire: distributing nearly all reserve income "risks starving the infrastructure needed to run a global stablecoin network." USDC's reserve income funds compliance, multi-chain engineering, and institutional relationships OUSD cannot replicate from a standing start.
  • Adoption is not yield-driven. Tether — $145B+ in supply — pays zero yield. USDC's Q1 2026 volume grew 263% YoY during a period of declining reserve return rates. Transaction utility, not yield, is the primary adoption driver.
  • Standard Chartered partnership (2 July 2026). Two days post-selloff, Circle announced that Standard Chartered — a G-SIB — will offer institutional clients USDC minting/redemption. Standard Chartered is simultaneously an OUSD partner, demonstrating institutions are making bilateral bets, not exclusive defections.
  • The market-cap destruction is disproportionate. CRCL lost ~$2.8B in market cap on 30 June. For this to be rational, OUSD would need to impair Circle's NPV earnings by ~$2.8B — which we cannot construct from any credible adoption scenario.

The Three Pillars of the Long Thesis

  • Volume growing faster than rates are falling. Reserve return rate fell 66bps to 3.5% in year to Q1'26; USDC onchain volume grew 263% YoY in the same period. Management guides 40% CAGR in circulation through the decade.
  • Coinbase renegotiation — August 2026 catalyst. The Circle-Coinbase agreement expires ~18 August 2026. OCC rule-making has weakened Coinbase's bargaining position by restricting its yield-reward model. OUSD's announcement — perversely — weakens Coinbase further. Even marginal improvement adds $100–170M to RLDC at near-100% incremental margin. The market prices in zero improvement.
  • Arc blockchain is a free embedded option. $222M presale at a $3B FDV — backed by BlackRock, NYSE parent ICE, a16z, and Apollo — is entirely excluded from guidance and all consensus analyst models. Circle retains 25% of ARC token supply. Arc failure ≈ zero incremental loss from current pricing.

Key Financial Metrics

MetricFY2025AQ1'26A2026E2027E
Revenue & Reserve Income$2.7B$694M~$2.8B~$3.7B
YoY growth+64%+20%+14%E+33%E
RLDC margin~40%41.4%~43%E~48%E
Adj. EBITDA$582M$151M~$604M+E~$1.0B+E
Adj. EBITDA margin53%~50%E~55%E
EPS (diluted)($0.18)*$0.21$0.85E~$1.60E
USDC supply (EoP)$75.3B$77.0B~$105B+E~$150B+E

*FY2025 GAAP EPS impacted by $424M IPO-related SBC vesting. E = Castellan estimate. Sources: Circle SEC filings, Zacks, Castellan analysis.

Scenario Analysis

ScenarioKey assumption2026E Adj. EBITDA12M targetUpside
BearOUSD $20B+ supply; Coinbase renews unchanged; rates fall to 2.8%~$450M$80–90+17–32%
BaseOUSD below $10B; Coinbase terms improve modestly; Arc mainnet in 2026~$650M$142+108%
BullOUSD lags USDG; Coinbase deal significantly improved; Arc gains traction~$900M$200–220+193–222%
Analyst consensus as of 6 July 2026: Bernstein Buy $190 · William Blair Outperform · Morgan Stanley Neutral $106 · Wolfe Research Underperform $131.76. Even the most bearish institutional voice has a price target 93% above entry.
Castellan Capital holds a long position in CRCL. This note is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results. This note has not been approved as a financial promotion under FSMA 2000 and is not directed at retail clients.
↑ Collapse article

Short Thesis: Solstice Finance (SLX)

SLX carries extreme token concentration, a documented stablecoin depeg, and live collateral deterioration in strcUSX — structural concerns the current TVL multiple does not reflect.

Read article ↓ ↓ Download PDF
PositionSHORT
Reference Price~$0.65
FDV~$564M
Circulating supply24.3%

Overview

Solstice Finance (SLX) is a Solana-native DeFi protocol built by Solstice Labs AG under Deus X Capital, issuing the USX synthetic dollar, eUSX yield product, and strcUSX — a structured-credit vault backed by Strategy Inc.'s STRC preferred shares. The SLX governance token launched 25 May 2026. At roughly $0.65, SLX trades at a fully diluted valuation of $564M against a circulating market cap of ~$137M — a 4:1 FDV/Mcap ratio with three-quarters of total supply still to unlock.

Core Short Pillars

  • Extreme token concentration. Third-party wallet analytics indicate top 10 wallets hold 70–95% of SLX supply (estimates vary by snapshot). Only 24.3% of supply circulates. Solflare's own risk flags note thin secondary liquidity and "not many holders." The Team & Advisors cliff is ~May 2027 — the overhang is structural, not event-driven.
  • USX depegged to $0.10 in December 2025. The protocol's flagship "overcollateralised settlement asset" traded down 90% on secondary markets before liquidity injections restored parity. PeckShieldAlert corroborated this as a secondary-market liquidity drain rather than collateral failure — but the episode reveals that a $300M+ TVL protocol's secondary depth is materially shallower than its marketing implies. Recovery relied on discretionary, centralised intervention.
  • strcUSX wraps deteriorating collateral. STRC (Strategy Inc. preferred shares) traded as low as $71.25 — 29% below par — in June 2026. MSTR common is down ~82% from its July 2025 peak. Strategy's market-adjusted NAV fell below 1.0×. Rosen Law Firm announced a securities fraud investigation covering all five Strategy public securities. Solstice has packaged this distressed instrument as institutional "structured credit yield."
  • Funding-rate dynamics create near-term squeeze risk. Elevated negative funding on SLX perpetuals raises the cost of carrying a short and can force covering irrespective of fundamentals — a standalone risk factor that should be sized separately from the structural view and monitored weekly.

Relative Value vs. Comp Set

MetricSLX (Solstice)ENA (Ethena)ONDO (Ondo Finance)
Protocol TVL~$500–508M*~$4.8B~$3.5B
Market cap (circ.)~$137–160M~$650–870M~$1.5B
FDV~$564M~$1.06–1.4B~$3.0–3.1B
Mcap / TVL~0.27–0.32×~0.14–0.18×~0.42×
% supply circulating24.3%~62%~49%
Distance from ATH-16% to -39%-94% (ATL Jun'26)-86%
Token track record~1 month~2 years~2 years

*TVL is company-reported and independently unverified. Sources: CoinGecko, DeFiLlama, Tokenomics.com, Castellan analysis.

"SLX trades at 1.7–2.3× the TVL multiple of Ethena — a far larger, more battle-tested synthetic-dollar protocol. The market is pricing Solstice closer to Ondo (the most credentialed institutional RWA name) than to the most analogous comp. We see no fundamental basis for this premium."

Bull Case (for balance)

  • Multi-year live track record. Solstice's yield products claim a 13.96% net IRR over three years and zero negative months — a genuine live track record predating the token, unusual for the sector.
  • No VC overhang in the traditional sense. No initial allocation to venture capital firms removes one classic source of early forced selling.
  • Real institutional backing. Deus X Capital, Galaxy Digital, Anchorage Digital, and Bitcoin Suisse are credible names with substantive CVs.
  • Price action has not validated the bear case yet. SLX remains near its all-time high from mid-2026. A correct fundamental view can be early and expensive to carry.

Open Diligence Items

  • Pull and independently verify the Richie May financial statement review and Accountable Proof of Solvency attestation — unavailable from public sources at time of writing.
  • Confirm Solstice's actual MiCA registration status with the relevant EU competent authority (notified vs. CASP authorised).
  • Engage an on-chain analytics firm (Nansen / Arkham) to independently resolve the 70%/95% top-holder discrepancy from a current wallet snapshot.
  • Track strcUSX TVL and redemption-queue behaviour against STRC/MSTR price action weekly — the most time-sensitive contagion channel.
Castellan Capital holds a short position in SLX and/or related instruments. This note is for informational purposes only and does not constitute investment advice. This note has not been approved as a financial promotion under FSMA 2000 and is not directed at retail clients.
↑ Collapse article