Circle’s IPO underscores need for a diversified crypto portfolio, says Bitwise CIO

Bitwise Chief Investment Officer Matt Hougan argues that the best way to build a "complete crypto portfolio" is not just allocating to Bitcoin and other base layer assets like Ethereum and Solana or applications further up the stack such as Uniswap, but crypto-related stocks too — with Circle's recent IPO being a case in point.

Circle, the issuer of USDC, went public last Thursday under the ticker CRCL in one of the hottest IPOs in years, Hougan noted in a  memo to clients late Tuesday. The offering was 25x oversubscribed, priced above the indicated range at $31, and soared 167% on day one. As of Tuesday's close, the stock is trading at $105.91, according to The Block's Circle price page , with a market capitalization of $28 billion — about half the size of Coinbase  and  Robinhood , for comparison.

Investors are evidently eager for CRCL exposure — a company at the center of the stablecoin ecosystem — in a sector Hougan describes as crypto's second killer app, after Bitcoin. "Over the past five years, stablecoin AUM has grown from just over $4 billion to $250 billion, and the U.S. Treasury Department projects they could top $2 trillion by 2030. It's hard to find another industry where the government’s base case is 700% growth in the next five years," he said.

"[The issuers] make money by taking the interest income from the Treasuries; stablecoins do not pay a yield," Hougan continued. "It's a simple business, but a good one. With short-term Treasury rates around 4%, stablecoins today generate around $10 billion in high-margin revenue for issuers. If stablecoin AUM grows to $2 trillion, that will turn into $80 billion/year."

A 'complete crypto portfolio'

Beyond bitcoin, a key crypto debate is where value will accrue: at the base layer (like Ethereum or Solana), which powers the ecosystem, or higher up the stack in apps such as Uniswap that generate revenue, Hougan said.

While many crypto natives don't stray beyond decentralized ecosystem investments, the Bitwise CIO argues that crypto-related stocks like Circle are also a classic application play — leveraging the infrastructure of public blockchains but only paying a small fee for the privilege.

"Put differently, Circle can issue a stablecoin on Ethereum for fractions of a penny, but it is immediately accessible by hundreds of millions of people in nearly every country in the world; can be transferred anywhere in the world almost instantly at very low cost; can be used in DeFi applications; can be programmed through smart contracts; and so on," he said. "Just as, thirty years ago, the internet opened up content production on a global scale — suddenly, anyone with an internet connection could publish content that could be read by anyone in the world, instantly — public blockchains do the same for finance. It’s software anyone can build on."

It's not just Circle — there are a growing number of crypto equities using blockchains to build new businesses. Coinbase earns from its Layer 2 Base network, Galaxy brings in around $100 million annually from staking, and Mastercard runs a platform that integrates with blockchains such as Ethereum and Avalanche to help businesses borrow, lend, and make cross-border payments more efficiently, Hougan noted.

"All of this is to say, we believe many parts of the crypto ecosystem will thrive over the long term in a symbiotic way. The core infrastructure will grow more valuable as more applications use it, and the applications will become valuable as the infrastructure continuously improves," he said. "Of course, it's impossible to know whether more value will accrue to the blockchains themselves or the companies that are building on them. It's why I think the best way forward is to own them both."