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 circulating supply of about $77 billion. Behind every USDC is an equivalent value of dollar assets (primarily short-term U.S. Treasuries) held as reserves.

Circle’s revenue sources are straightforward: it invests these reserves in U.S. Treasuries to earn the spread. Total revenue in FY2025 was $2.75 billion, with 95% coming from reserve interest. It began trading in June 2025; its current market cap is about $15–20 billion.

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

This article answers: Is the transition happening? How much evidence is there? And how much is it worth?

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

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

For the same $77 billion of USDC, if it is merely being held by institutions to earn the spread, then Circle is an interest-rate-sensitive financial company, valued at 10–15x. If it is increasingly being 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 on-chain transaction volume far exceeds the growth rate of circulating supply. In FY2025, circulating supply grew 72%, while on-chain transaction volume grew 247%. This means each dollar of USDC is being used more frequently. This is not “more stock,” it is “faster flow.”

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

This gap by itself is the strongest signal: USDC is shifting from “an asset people hold” to “a network people use.” But this transition is not complete yet—later we will discuss what conditions are needed to confirm it.

3. Three-Tier Revenue Structure

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

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

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

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

Interest income ≈ average USDC circulating supply × reserve yield

The reserve yield in Q4 2025 is 3.81%, down 68 basis points from the previous quarter. This exposes the core contradiction: circulating supply is growing rapidly, but interest rates are falling—both sides are offsetting. If the Fed’s target rate drops to 3%, Circle would need USDC growth to exceed $150 billion to maintain its current revenue level.

Structural problem: 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, while Coinbase takes 50% of the interest outside the platform. In FY2025, for every $1 of interest Circle earns, about 60 cents goes to distribution partners.

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

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

This is the key to whether Circle can break away from 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 February 2026, annualized TPV is $5.7 billion, up about 100x since launch. 55 institutions have onboarded, 74 are under review, and 500+ are in the pipeline. It covers 14 markets including Brazil, Canada, Hong Kong, India, Mexico, Nigeria, the United States, and more.

But compared with the $16 trillion global cross-border payments market, $5.7 billion is still less than four ten-thousandths. The value of CPN is not in its size today, but in whether its growth can be sustained. If it captures 1% of the cross-border market, that would be $160 billion in annualized transaction volume—fees generated could potentially approach or even exceed interest income, and it would not be affected by interest rates.

CCTP (Cross-Chain Transfer Protocol) achieves native cross-chain transfers of USDC via “burn–mint.” Q4 2025 processed $41.3 billion, up 3.7x year over year. USDC cross-chain market share rose from 25% at the end of 2024 to 62% in January 2026, covering 30 chains. CCTP V2 introduces the Fast Transfer fee—a new source of revenue.

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 $7.0 million from Canton Network validator node revenue. Management guidance is $150–170 million in 2026.

This portion of revenue is not affected by interest rates and does not require sharing with Coinbase. When it exceeds 10% of total revenue, the market may begin using different valuation methodologies to value Circle. Currently, it is 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 serving 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 deployed (2027–28) → M4 Writes into institutional standard operating procedures (2029–30)

Before M2, Arc has zero value. But if it ultimately becomes the institutional-grade settlement standard, Circle’s value will no longer be “a fee-charging company,” but “a platform company.” This is a necessary condition for returns of 10x or more.

4. Assessing Whether the Transformation Is Happening: Seven Dimensions

It is easy to misjudge by looking at any single metric. The key is to see 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 base for Circle’s revenue. 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 (daily update), circle.com/transparency (weekly reserve proofs)

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

Answer the core question: Is USDC being used or held? Supply makes up only 25%, but adjusted transaction volume makes up 64%—each $1 of USDC does 2–3x as much as 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 share is needed. Currently $37 million per quarter; guidance is $150–170 million (2026). When it breaks above 10% of total revenue, valuation methodologies will change.

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

6. Recent Catalysts

Coinbase revenue-sharing agreement expires (August 2026)

This is the single biggest catalyst within the next 24 months. Currently Circle shares about 60% of its revenue with partners. If after renegotiation the RLDC profit margin rises from 40% to 50–55%, the effect is equivalent to instantly adding 25–35% profit. But Coinbase has no incentive to give up significantly—distribution of USDC on the Coinbase platform is still Circle’s largest growth engine. The outcome is uncertain, but the odds that the direction will be better than the current situation are higher.

OCC national trust bank license

Conditionally approved in December 2025. Full approval means: it can open accounts directly with the Federal Reserve (earning IORB interest, eliminating counterparty risk), bypassing commercial banks to process the annual $483 billion minting/redemption flow, creating an unbreakable trust barrier for enterprises and governments to adopt USDC. No other stablecoin issuer has this.

x402 Foundation (established April 2026)

Coinbase contributes the x402 payment protocol to the Linux Foundation. x402 activates HTTP 402 status codes as an internet-native payments layer, enabling AI agents, APIs, and applications to settle directly in 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 microtransaction will increase USDC velocity without increasing supply.

Note: x402 is led by Coinbase, not by Circle. Impact on CRCL: mildly bullish—expands USDC usage scenarios, but does not change the scale of the fundamentals.

7. Conditions for 5–10x Returns

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

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

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

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

1. CPN TPV breaks above $1000B within 2–3 years, with at least one major corridor entering formal production

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

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

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

At present, only the second condition (profit margin) is clearly improving. A 10x outcome is a position you “earn,” not a position you “bet.”

8. Main Risks

Interest rates falling faster than USDC growth

This signal already appeared in Q4 2025: interest rates fell by 68 bps, partially offsetting 100% circulating supply growth. If the Fed drops to 2.5–3% in 2026–2027, there could be windows where earnings fall below expectations for 1–2 quarters.

Tether compliance push

USDC’s biggest differentiation advantage is compliance. But Tether earned $10 billion in the first three quarters of 2025 and is in talks with the Big Four accounting firms for a full audit. If Tether gains compliance status within 2–3 years, USDC’s differentiation advantage will be greatly reduced. USDT currently has a market share above 60% and a market cap of $1830 billion—so it has sufficient resources.

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

New stablecoins such as Ethena (USDe) and Sky capture market share by directly paying yields to holders. Circle is constrained by its regulatory-compliant positioning, and currently cannot directly pay interest to USDC holders.

Stripe is a founding member of the x402 Foundation, and it is also building its own stablecoin payment system. Stripe’s strategy is to integrate every standard that could potentially win—its participation does not mean exclusive support for USDC, and it does not rule out Stripe launching its own stablecoin or deeply integrating USDT in the future.

9. Conclusion

Circle is not a company that is “definitely” destined to become a trillion-dollar business. But it could be one of the few fintech companies today that has structural conditions capable of touching that ceiling.
The current valuation almost only reflects USDC interest revenue. The market is asking: Is Circle truly an interest-rate-driven finance company, or is it a fee-based digital dollar infrastructure? The answer has not been determined yet—but the data is trending toward the latter.

The core items to track are three things: whether USDC circulating supply is growing, whether each dollar of USDC is being used more frequently, and whether revenue beyond interest is getting larger. 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.