Circle doubled in a month, what is the market betting on?

Author: 0x2333

In June last year, Circle went public at $31 per share. Two weeks later, the stock price peaked at $299. Then, it fell back to $50, a drop of over 80%. Then, in February this year, the financial report came out, and within two weeks, it doubled, reaching $111 today.

During the same period, Bitcoin dropped by 40%. The stock price of Circle has decoupled from the crypto market.

"You are seeing that kind of decoupling"

The drop to $50 is not hard to understand within the circle.

In September and October 2025, the Federal Reserve cut the benchmark interest rate by 25 basis points twice, bringing it down to 3.75%. The reserve yield followed suit, with Q3 data showing that the USDC unit reserve yield decreased by 96 basis points year-on-year.

How much does this 96 basis points mean? Circle calculated in its prospectus that for every 100 basis points the Fed cuts, the annual interest income loss is about $618 million. Half of the loss would be offset by the decline in distribution costs, resulting in a net loss of about $300 million. But this is just a static calculation, assuming the USDC scale remains unchanged. In 2025, the Fed cut rates a total of 75 basis points, and just this one variable took nearly $200 million from Circle's annual revenue.

It doesn't end there. There is a revenue-sharing agreement between Circle and Coinbase. All reserve income generated by USDC held on the Coinbase platform belongs to Coinbase, while the off-platform portion is split evenly between the two companies. In Q4, total reserve income was $733 million, with distribution costs at $461 million, leaving Circle with a net reserve income of $273 million. Non-interest income was $37 million, less than 5% of total revenue.

This structure is the fundamental reason for Circle's stock price drop from $299 to $50. Rate cuts compress reserve yields, and the fixed revenue-sharing structure with Coinbase means Circle is caught in the middle, with a clear ceiling on how much income it can collect and a clear floor on how much profit it can retain.

However, on February 25, after the financial report was released, Circle's stock surged by 35%.

EPS was $0.43, while analysts expected $0.16. This was not a small beat, but a face-slapping exceedance. But what drove the repricing was not just the numbers in this quarterly report, but a larger structural fact that this report allowed the market to see for the first time.

In 2025, the entire crypto market cap dropped by over 40% from its peak. During this time, the circulation of USDC increased by 72%, reaching $75.3 billion, a record high. The total market cap of stablecoins also surpassed $314 billion during the same period, also a record high.

This was not a tailwind in a bull market, but a headwind in a bear market.

The implication of this for Circle's pricing logic is fundamental. Previously, the market's valuation framework for CRCL treated it as a beneficiary of the crypto cycle: in a bull market, everyone trades with USDC, and the scale grows; in a bear market, on-chain activity decreases, and the scale shrinks. Coinbase's logic is like this: trading volume is everything, and in a bear market, fee income falls off a cliff.

But the data from 2025 negated this framework. The growth of USDC did not stop in the bear market; not only did it not stop, but it accelerated.

Circle CEO Allaire said in the earnings call, "You are seeing that kind of decoupling." He was referring to the decoupling between BTC and stablecoins. But the half-sentence he didn't finish was that the use case for stablecoins is shifting from being a pricing unit for crypto trading to becoming the settlement infrastructure for global payments.

The driving force is no longer speculative trading demand, but a group of participants who have never appeared in the crypto space are starting to enter. Visa announced it would expand the scope of USDC settlements, allowing U.S. Visa issuers to complete settlements with USDC outside normal banking hours. Mastercard followed suit, and JPMorgan launched several USDC-related products last year. Intuit announced a partnership with Circle to bring low-cost programmable payments to its tens of millions of business and individual customers, and Polymarket completed a large-scale migration using USDC as its core settlement asset.

These are not crypto-native users depositing and withdrawing money. This is traditional financial institutions embedding USDC into their payment settlement pipelines. These two use cases correspond to completely different valuation logics. The former follows the crypto cycle, while the latter follows the scale of global payments. The global cross-border payment market is approximately $150 trillion annually, and USDC's on-chain transaction volume for one quarter is $11.9 trillion, a year-on-year increase of 247%. These two numbers cannot be directly compared, but the market is beginning to price Circle using the second framework.

GENIUS Act and a Pure Entry Ticket

There is a saying circulating widely in the circle: "If your argument is that stablecoins will eat up global payments, CRCL is the most direct bet. COIN is a conglomerate that also benefits from USDC revenue sharing; the two are different tools corresponding to different narratives."

This statement explains why $CRCL was able to move independently while Coinbase's stock price was stagnant. Coinbase operates as an exchange, a wallet, a Base chain, and institutional custody, with USDC being just one of many business lines for it. Circle only does one thing: issue and circulate USDC. If you want to bet on the stablecoin sector itself, the only pure target available in the market is one.

This logic became clearer after the GENIUS Act was passed.

In July 2025, the act was implemented, establishing the first federal regulatory framework for stablecoins, requiring compliant issuers to hold 100% cash or short-term government bonds to back reserves and undergo regular audits. On the day the GENIUS Act was passed, $CRCL surged by 34%. The market understood this signal. This was not just a compliance benefit, but a regulatory moat drawn between USDC and USDT, a line that Tether cannot cross in the short term.

Data from JPMorgan confirmed this judgment, showing that after the act was passed, the overall stablecoin market grew by 19%, with USDC's market share rising from 24% at the beginning of the year to 25.5%, while Tether fell from 67.5% to 60.4%. The numbers for on-chain transaction volume are even more direct: USDC surpassed USDT in Q4, capturing about 50% of stablecoin on-chain transaction volume, marking the first time Tether has been overtaken in this dimension in years.

But Tether did not concede defeat. After the GENIUS Act was passed, Tether launched USAT, collaborating with Anchorage Digital and Cantor Fitzgerald to design reserves specifically according to GENIUS standards. The CEO of USAT, Bo Hines, is a former White House crypto advisor. Currently, USAT's circulation is about $20 million, which is almost negligible compared to USDC's $75.3 billion, but Tether has the largest stablecoin user network globally, and Cantor Fitzgerald brings Wall Street relationships, which is not a combination to be underestimated.

Meanwhile, a number of names that have never appeared in the stablecoin sector are also entering. Fidelity issued FIDD, operating on Ethereum, with 100% GENIUS standard reserves, aimed at institutions and retail. Robinhood and Revolut are reportedly developing their own stablecoins. JPMorgan and US Bancorp are expanding their stablecoin plans. After acquiring Bridge, Stripe embedded stablecoin settlement pipelines into its $1.9 trillion annual payment flow. Treasury Secretary Bessent stated that the U.S. stablecoin market could reach $3.7 trillion by the end of this decade. USDC's current $75.3 billion is less than 3% of that number.

The GENIUS Act opened the door not just for Circle, but for the entire traditional financial system. The first-mover advantage is real: support for 30 blockchain natively, deep ties with Visa and JPMorgan, and years of accumulated enterprise API infrastructure are not things that new entrants can replicate in just a couple of years. Bernstein set a target price of $190, citing the regulatory moat and competitive barriers of the technology stack.

But the depth of the moat is something no one knows the answer to until real pressure testing arrives. There is also a question that is rarely discussed directly in the circle: Circle and Coinbase's revenue-sharing contract has a fixed term, and in the next round of renegotiation, Coinbase's bargaining chips will not be less than they are now, with USDC's holding proportion on its platform rising from 5% in 2022 to 22% now. The outcome of the negotiations will directly affect how much Circle can actually retain from USDC's growth.

$23 Billion, Betting on a Story That Hasn't Happened Yet

A large part of Circle's current valuation comes from a story that hasn't happened yet.

Allaire spent a considerable amount of time in the earnings call discussing the payment needs of AI Agents. When executing autonomous tasks, AI Agents require small, high-frequency, cross-time-zone payments, calling APIs, purchasing computing power, and completing cross-border settlements. Allaire referred to this scenario as the "machine economy," arguing that when the number of AI Agents exceeds that of human users, the primary users of payment infrastructure will no longer be humans, but machines.

These needs create friction in traditional payment systems. Credit cards have business hour restrictions, require manual authorization, and the minimum fee structure makes payments below $0.01 economically unfeasible. Stripe charges a minimum of $0.30 plus 2.9%, while Visa and Mastercard's cross-border fees average 1.5%-3%, and bank wire transfers do not operate on weekends.

USDC has none of these technical limitations; it operates 24/7, settles on-chain, and on high-speed chains like Solana, the cost per transaction is less than $0.001, with Arc targeting $0.00001. Circle has specifically developed payment infrastructure aimed at AI Agents, and the Arc testnet is already live. This is not a "slightly cheaper" improvement; it is a magnitude difference in the entire cost structure.

Mark Palmer, an analyst at Benchmark-StoneX, put it bluntly: "AI Agents need programmable currency that can be directly embedded into software workflows, without long settlement windows," while the infrastructure of card organizations is designed for human checkout processes, not for machines.

How real this demand is can be seen from the speed of action at the protocol level.

In May 2025, Coinbase launched the x402 protocol, using the long-dormant HTTP 402 status code to enable automatic payments for AI Agents, allowing servers to directly request USDC payments before responding to requests, without needing manual authorization. Five months later, x402 processed over 100 million payments. Google launched AP2 (Agent Payment Protocol), and OpenAI is internally testing "Instant Checkout" in ChatGPT, with the underlying settlement layer being a combination of Stripe and stablecoin tracks. These are not white papers; they are infrastructures already running in production environments.

Visa's data provided an anchor point for perceiving scale. In November 2025, Visa's monthly volume through stablecoin settlements was annualized at about $3.5 billion, which had risen to an annualized $4.5 billion by January 2026. Compared to Visa's total annual transaction volume of about $16 trillion, this number is almost negligible. However, the directional change is more noteworthy than the absolute value, as Visa itself is expanding this pipeline. Coinbase CEO Brian Armstrong also made the same judgment in early March, stating, "Soon, the number of AI Agents initiating transactions will exceed that of humans."

The distance between narrative and reality is clearly illustrated by the data.

The total transaction volume of x402 over the past 30 days was $24 million, with 94,000 buyers and 22,000 sellers participating. During the same period, the global e-commerce market size was estimated at $6.88 trillion. McKinsey estimates that the current real payment use of stablecoins is about $390 billion/year, with B2B accounting for about $226 billion and retail being even less. ECB data shows that organic retail transfers account for about 0.5% of the total stablecoin flow.

Circle reported a net loss of $70 million for the entire year of 2025. The Arc mainnet is planned to launch in 2026 and is currently still in the testnet phase. AI and non-interest income for the year combined accounted for less than 5% of total revenue.

Gartner predicts that the scale of the AI Agent economy will reach $30 trillion by 2030, and Bessent predicts that the stablecoin market will reach $3.7 trillion by the end of this decade. If these numbers are true, Circle's current $75.3 billion USDC circulation scale is indeed just the starting point. However, from the $24 million monthly transaction volume of x402 to the $30 trillion Agent economy, there is a road that no one has walked before.

The $23 billion market cap is betting that this road will be completed.

Circle went public last June at $31, peaked at $299 two weeks later, then dropped back to $50, and has now doubled again. Within this curve, there is a question that has never been truly answered: What kind of company is Circle ultimately?

Is it an interest rate arbitrage business, a compliant stablecoin infrastructure, or the settlement layer of the AI economy? Allaire said, "You are seeing that kind of decoupling," but where the decoupling leads is another question.