Is it still worth buying the Circle dip?

Author: Leo Z; Source: @zhao_eth

1. What is Circle

Circle is the issuer of USDC. USDC is the world’s second-largest stablecoin, with roughly $77 billion in circulation. Behind every single USDC is an equivalent amount of dollar assets (mainly short-term U.S. Treasuries) held in reserve.

Circle’s revenue source is very simple: it invests these reserves in Treasuries and earns the spread. FY2025 total revenue was $2.75 billion, with 95% coming from reserve interest. Listed in June 2025, its current market cap is about $15–20 billion.

Circle’s market valuation is basically: “USDC circulating supply × interest rate × a conservative multiple.” This means: if you think Circle is only an interest-eating company, the current valuation is roughly reasonable. If you think it’s turning into a fee-based digital dollar infrastructure network, the current price is far from reflecting that value.

This article answers one question: Is the transformation happening? How much evidence is there? And what is it worth?

2. The Core Question: Is USDC being “held” or being “used”?

Before discussing valuation, answer a question more important than any financial model.

With the same $77 billion of USDC, if institutions are just holding it to earn the spread, Circle is an interest-rate-sensitive financial company, valued at 10–15x. If it’s being frequently used for payments, settlement, cross-border transfers, and developer calls, then Circle is growing into a fee-based infrastructure network, valued at 25–30x.

Two key data points can help you judge:

First, the growth rate of USDC’s on-chain transaction volume far exceeds the growth rate of its circulating supply. In FY2025, circulating supply grew 72%, but on-chain transaction volume grew 247%. This means every dollar of USDC is being used more often. This isn’t “more stock,” it’s “faster flow.”

Second, USDC has already surpassed USDT to become the largest settlement asset. Visa Onchain Analytics removes about 85% of on-chain noise (bots, internal transfers between exchanges, high-frequency arbitrage). After adjustment, USDC accounts for 64% of real-economy settlement volume (Mizuho, Feb 2026), while USDT accounts for only about 28%—even though USDT’s circulating supply is 2.4x that of USDC.

The gap itself is the strongest signal: USDC is shifting from “an asset people hold” to “a network people use.” But this transition isn’t finished yet—later we’ll cover what conditions are needed to confirm it.

3. A Three-Tier Revenue Structure

Circle’s revenue comes in three layers. The market is currently valuing almost only the first layer.

First layer: USDC interest revenue—what Circle makes money from today

USDC is Circle’s starting point and the source of its current 95% of revenue. As of the end of 2025, USDC circulating supply was $75.3 billion, up 72% year over year, far exceeding Circle’s own 40% annualized growth target.

The revenue logic is straightforward: around 80% of USDC reserves are invested in short-term U.S. Treasuries (via the USDXX fund managed by BlackRock), earning the spread.

Interest revenue ≈ average USDC circulating supply × reserve yield

Q4 2025 reserve yield was 3.81%, down 68 bps from the previous quarter. This exposes the core contradiction: circulating supply is growing quickly, but interest rates are falling—both are being offset against each other. If the Fed’s target rate falls to 3%, Circle would need USDC to grow to over $150 billion to maintain its current revenue level.

Structural issue: Coinbase takes most of the revenue. Under the revenue-sharing agreement signed in 2023, 100% of USDC interest on the Coinbase platform goes to Coinbase, and Coinbase takes 50% of interest outside the platform. In FY2025, for every $1 of interest Circle earns, about 60 cents went to distribution partners.

The good news is that margins are improving. The RLDC (Revenue Less Distribution Costs) profit margin expanded from 30.0% in Q4 2024 to 40.1% in Q4 2025. Net income margin is 1.2–1.8%, after deducting Coinbase revenue sharing and operating costs.

Second layer: Payments and trading revenue—new business that’s growing

This is the key to whether Circle can shed the “interest-rate company” label.

CPN (Circle Payments Network) went live in May 2025, providing 7×24 cross-border settlement based on USDC for banks, payment companies, and enterprises. As of Feb 2026, annualized TPV is $5.7 billion, growing about 100x since launch. 55 institutions have integrated, 74 are under review, and 500+ are in the pipeline. It covers 14 markets including Brazil, Canada, Hong Kong, India, Mexico, Nigeria, the U.S., and others.

But $5.7 billion compared with the global cross-border payments market of $16 trillion is still less than four one-thousandths. The value of CPN is not its current scale, but whether its growth can be sustained. If it can capture 1% share of the cross-border market, that would be $160 billion in annualized transaction volume—fees generated could be close to or even exceed interest revenue, and they would not be affected by interest rates.

CCTP (Cross-Chain Transfer Protocol) enables native cross-chain transfers of USDC through “burn-mint.” In Q4 2025, it handled $41.3 billion, up 3.7x year over year. USDC cross-chain market share increased from 25% at the end of 2024 to 62% in Jan 2026, covering 30 chains. CCTP V2 introduced the Fast Transfer fee—a new revenue stream.

Other Revenue (non-interest revenue) is the most direct “evidence of transformation.” FY2025 jumped from $3 million per quarter to $37 million per quarter, including $24.7 million from subscription services, $12.2 million from transaction revenue, and $7 million from Canton Network validation node revenue. Management guidance for 2026 is $150–170 million.

This part of revenue isn’t affected by interest rates and doesn’t require Coinbase revenue sharing. Once it exceeds 10% of total revenue, the market may start valuing Circle using different valuation methods. Currently, it’s about 4%.

Third layer: Settlement platform—long-term potential

Arc is Circle’s institutional-grade settlement chain planned to launch its mainnet in 2026, with USDC as the native gas token. The testnet has already processed more than 166 million transactions, with a confirmation time of 0.5 seconds, and 100+ institutions participating (including Goldman Sachs and Mastercard).

Arc’s roadmap is divided into four phases:

M1 public testnet (completed) → M2 real funds on-chain (2026) → M3 margin/collateral/settlement use cases implemented (2027–28) → M4 written into institutional standard operating procedures (2029–30)

Before M2, Arc has zero value. But if it ultimately becomes the institutional settlement standard, Circle’s value won’t be “a payments company,” but “a platform company.” This is a necessary condition for 10x+ returns.

4. Whether the transformation is happening: Seven dimensions

It’s easy to misjudge by looking at any single metric. The key is whether multiple dimensions are improving at the same time—when scale, activity, profit margins, new revenue, and user growth all point in the same direction, the transformation is happening.

5. The three most important tracking metrics

① USDC circulating supply (check daily)

The revenue base for Circle. Circulating supply × reserve yield = interest revenue. You should track “quarterly average circulating supply” rather than the end-of-period snapshot. Currently about $77 billion.

Data source: defillama.com/stablecoin/usd-coin (updated daily), circle.com/transparency (weekly reserve attestations)

② USDC share in Visa adjusted transaction volume (check weekly)

Answer the core question: Is USDC being used or being held? Supply accounts for only 25%, but adjusted transaction volume accounts for 64%—each dollar of USDC is doing 2–3x more “work” than USDT.

Data source: visaonchainanalytics.com → filter by Stablecoin → click “Show % of Total” → read the USDC line

③ Other Revenue (non-interest revenue) (check each quarter)

The only metric that directly proves Circle is making money beyond interest. Not affected by interest rates, and no Coinbase revenue sharing is required. Currently $37 million per quarter, guidance $150–170 million (2026). Once it breaks above 10% of total revenue, valuation methodology will change.

Data source: circle.com/pressroom (quarterly reports), SEC EDGAR search for Circle Internet Group

6. Recent catalysts

The Coinbase revenue-sharing agreement expires (Aug 2026)

This is the biggest single catalyst within the next 24 months. Currently, Circle shares about 60% of its revenue with partners. If renegotiated and the RLDC profit margin rises from 40% to 50–55%, the effect is like instantly adding 25–35% more profit. But Coinbase has little incentive to give up much—distribution of USDC on the Coinbase platform is still Circle’s largest growth engine. The outcome is uncertain, but the odds are higher that the direction is better than the status quo.

OCC country trust bank license

Conditionally approved in Dec 2025. Full approval would mean: it can open accounts directly at the Fed (earning IORB interest, eliminating counterparty risk), bypassing commercial banks for processing the $483 billion-per-year minting/redemption flows, and building an insurmountable trust moat for businesses and governments to adopt USDC. No other stablecoin issuer has this.

x402 Foundation (established in Apr 2026)

Coinbase contributes the x402 payment protocol to the Linux Foundation. x402 activates the HTTP 402 status code as an internet-native payments layer, so AI agents, APIs, and applications can settle directly through HTTP interactions—by default using USDC.

Participants: Google, AWS, Stripe, Visa, Mastercard, Amex, Shopify, Microsoft, Cloudflare, Circle. If x402 becomes the AI agent payment standard, every machine-to-machine micro-transaction will increase USDC usage (velocity) without needing to increase holding/supply.

Note: x402 is led by Coinbase, not by Circle. Impact on CRCL: mildly bullish—expands USDC usage scenarios, but doesn’t change the order of magnitude of the fundamentals.

7. Conditions for 5–10x returns

3–5x (high confidence)—purely from USDC growth

USDC is expected to reach about $200–300B by 2028 on a 40% CAGR. Even if interest rates fall to 3%, $250B × 1.5% net spread = $3.75B net revenue. At 20x, market cap would be $75B. From the current $15–20B to $75B is about 4x. No contribution needed from CPN or Arc.

10x (requires multiple conditions to be met at the same time)

From $15–20B to $150–200B, all of the following must happen:

1. CPN TPV breaks above $100B within 2–3 years, and at least one major corridor enters official production

2. Coinbase revenue-sharing agreement improves, and RLDC profit margin reaches 50%+

3. Other Revenue exceeds 10% of total revenue, proving there is scalable non-interest revenue

4. Arc reaches at least the M2 stage (real funds on-chain) and begins being priced by the market

Right now, among these four conditions, only the second (profit margin) is clearly improving. 10x is a position you “earn,” not a position you “bet” on.

8. Key risks

Interest-rate decline is faster than USDC growth

The signal already appeared in Q4 2025: interest rates fell by 68 bps, partially offsetting 100% of circulating supply growth. If the Fed cuts to 2.5–3% in 2026–2027, there could be a window of 1–2 quarters where earnings come in below expectations.

Tether compliance

USDC’s biggest differentiation advantage is compliance. But in the first three quarters of 2025, Tether earned $10 billion and is in talks with the Big Four accounting firms for a full audit. If Tether obtains compliant status within 2–3 years, USDC’s differentiation advantage would be significantly weakened. USDT currently has a market share over 60% and a market cap of $183B—so it has ample resources.

Competition from yield-bearing new stablecoins & payment giants like Stripe

New stablecoins like Ethena (USDe) and Sky take market share by paying yield directly to holders. Circle is constrained by its regulatory-compliance positioning and currently cannot pay interest directly to USDC holders.

Stripe is a founding member of the x402 Foundation and is also building its own stablecoin payment system. Stripe’s strategy is to plug into every standard that might win—its participation doesn’t imply exclusive support for USDC, and it doesn’t rule out Stripe launching its own stablecoin in the future or deeply integrating USDT.

9. Conclusion

Circle is not a company that is “definitely going to become a trillion-dollar” business. But it may be one of the few fintech companies today that has structural conditions that can reach this ceiling.
The current valuation almost only reflects USDC interest revenue. The market is asking: Is Circle truly a rate-driven financial company, or is it a fee-based digital dollar infrastructure? The answer hasn’t been decided yet—but the data is leaning toward the latter.

The core things to track are three: whether USDC circulating supply is growing, whether each dollar of USDC is being used more frequently, and whether non-interest income is increasing. When all three improve at the same time, the transformation is happening.

Data sources: Circle IR, SEC EDGAR, DefiLlama, Visa Onchain Analytics, Artemis Terminal, CoinDesk, Mizuho Research

Disclaimer: This article does not constitute investment advice. All data is as of April 2026.