Instagram Direct blue circle
Without being able to see your screen, it's difficult to know what you're referring to, but I've done as much research as I can into what the Instagram Direct blue circle could be. I've outlined the options for you below:
1. The blue circle on Instagram Direct could indicate that conversation status of individual members. Take a look at the photo below for clarification.
The person on the left of the image before the "to" is the conversation starter.
The green tick indicates that the person in the image has read the conversation.
The blue circles with little speech symbols in them indicates that the person in the image has read the conversation and has ALSO commented on it.
This seems the most likely answer to your question to me, but I did find one other potential match.
2. The other answer would be that you're referring to the Instagram camera icon, as seen below.
