What to know:
- Circle shares fell 16% due to Open USD’s launch backed by over 140 financial and crypto companies.
- Open USD will share reserve yield with the partners, undermining the distribution of the USDC coin to grow.
- There is currently $73 billion worth of USDC circulating, while the success of OUSD will determine the competitive impact.
Circle Shares declined sharply after the unveiling of Open USD (OUSD), a new stablecoin network backed by more than 140 financial and cryptocurrency companies. Such a downturn of Circle Shares was explained by the concern of investors that the consortium would pose a threat to Circle because of weakening Circle’s institutional distribution model, which contributes to the expansion of the USDC coin.
The participants in the project include major players in the sphere such as Stripe, Coinbase, Visa, Mastercard, BlackRock, BNY, American Express, and PayPal. The broad partner base caught market attention because Circle’s business is dependent on its relationships with institutions, expanding USDC’s presence by payment providers, exchanges, asset managers, and fintech platforms worldwide.
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Open USD Introduces a Different Stablecoin Revenue Model
In contrast with Circle, the Open USD consortium will share the earnings from reserve interest with its partners. This approach reshapes the competitive landscape by rewarding companies that contribute to distribution, potentially encouraging payment firms and exchanges to support OUSD instead of concentrating activity around existing stablecoin ecosystems, adding further pressure on Circle Shares.
Experts still cannot agree if OUSD poses an immediate threat to the company. The general partner at Dragonfly, Rob Hadick, sees such a threat from the fact that Stripe is building a financial ecosystem, which can exert pressure on Circle’s business. However, Clear Street Managing Director Owen Lau described the 16% decline in Circle Shares as an overreaction before OUSD officially launches later this year.
Circle Shares Outlook Depends on Open USD Adoption
The launch of OUSD means more competition not only in issuing tokens but also in distribution and participation in the network. Although the partners’ revenue sharing looks quite promising, there are examples when this kind of approach does not necessarily result in market leadership. For instance, the Global Dollar Network created by Paxos uses the same strategy, but its USDG stablecoin is smaller than the USDC and USDT coins.
Other factors also had an influence on the market sentiments. The upgrade of Circle Internet Group to Neutral from Sell rating, along with the lowering of the price target from $97 to $55 made by Compass Point, was explained by the fact that Open USD undermined Circle’s long-term payments opportunities. The premium valuation leaves little room for uncertainties as investors reconsider growth and competitive prospects.
For investors and institutions, the future development of the situation will be determined by the successful launch of OUSD, its adoption, the implementation of reserve sharing, and blockchain compatibility. At the moment, Circle leads with about $73 billion in USDC circulation; however, the success of OUSD will show if its institutional partnerships are enough to maintain its leading position.
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