'Circle's Better Set up than Coinbase'': Gala
Why It Matters
The trade highlights how regulatory and business‑model differences can create asymmetric risk‑reward opportunities in the crypto‑payments space, guiding portfolio allocation.
Key Takeaways
- •Circle's stablecoin infrastructure outperforms Coinbase's volatile revenue mix.
- •Regulatory shifts favor Circle, potentially reducing Coinbase's revenue share.
- •Coinbase still reliant on trading and staking, exposing it to market cycles.
- •Circle's upcoming L1 blockchain, Art, adds programmable B2B payment layer.
- •Long Circle, short Coinbase pair trade may capture stablecoin‑centric upside.
Summary
In a recent Hot Picks segment, senior equity researcher Gus Gala of Monness, Crespi & Hardt advocated a pair trade—going long Circle Internet Group while shorting Coinbase—based on divergent stable‑coin business models.
Gala notes Circle’s revenue is anchored to the interest earned on its USDC and EUR‑stablecoins, offering a predictable cash‑flow stream. By contrast, Coinbase derives roughly half its top line from volatile trading, staking and emerging services, leaving it exposed to the ongoing crypto‑market correction, which historically lasts about 350 days from peak to trough.
He cites recent U.S. regulatory tweaks that close a loophole on stable‑coin rewards, a change that will shrink Coinbase’s share of USDC earnings but leave Circle largely untouched. Circle’s rollout of its own L1 blockchain, Art, further embeds programmable money into B2B cross‑border payments, where transaction costs can be a thousandth of a cent.
If the crypto cycle bottoms later this year, Circle’s stable‑coin infrastructure could capture growing B2B demand, while Coinbase may see earnings pressure. The suggested long‑Circle/short‑Coinbase trade thus offers investors a way to bet on the sector’s structural shift toward stable‑coin‑centric utility.
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