Bitwise: The latest draft of the "Clarity Act" causes Circle to plummet 20%. Future market valuation of Circle under review.

Author: Matt Hougan, Chief Investment Officer of Bitwise; Translated by: Jinse Finance

Based on conservative assumptions, even considering the recent concerns raised by the CLARITY Act, I expect Circle’s value to reach $75 billion by 2030.

One of the most common questions people ask me is, “How should I invest in stablecoins?”

Typically, we suggest that people consider cryptocurrencies that support the stablecoin ecosystem, such as Ethereum, Solana, and Chainlink, and/or crypto companies that are positioned in this space, like Circle and Coinbase. Since it’s difficult to predict who will benefit the most from the rise of stablecoins, a reasonable strategy is to invest across the entire sector.

However, among all the options, one opportunity stands out: Circle—the issuer of the world’s second-largest stablecoin, USDC. It is the only publicly traded, pure stablecoin company. For me, it is the most obvious choice.

So, is this a good investment?

Now is a timely moment to answer that question, as Circle’s stock price has plummeted significantly due to news (Circle dropped 20% on March 24): the latest draft of the CLARITY Act restricts platforms’ ability to pay interest income to stablecoin users. But I believe this reaction is somewhat exaggerated.

To explain why, we need to examine Circle’s future from a macro perspective.

Three Core Questions Determining Circle’s Future

1. How large will the stablecoin market be?

The first question is how much the stablecoin market will grow. There are various predictions about this, but the most widely cited comes from Citigroup. The report’s “baseline scenario” predicts that by 2030, assets under management (AUM) for stablecoins will reach $1.9 trillion; under the “optimistic scenario,” it could be $4 trillion.

News related to the CLARITY Act has not changed this baseline prediction. So far, interest income has not been the main driver of stablecoin growth. Currently, the vast majority of stablecoin holdings do not generate interest. The rapid rise of stablecoins can be attributed to their ability to efficiently and reliably transfer funds globally—for trade settlement, as collateral for loans, as a substitute for unstable fiat currencies, and in many other scenarios.

Convenience is the core advantage of money, and this is where stablecoins excel. Currently, the average annual interest rate for a typical U.S. savings account is about 0.60%, while checking accounts yield only 0.07%. People do not deposit money into these accounts for the interest. If the global financial system is increasingly migrating to blockchain rails, then regardless of whether stablecoins provide interest, I expect them to play an increasingly important role in this transformation.

My intuition tells me that Citigroup’s baseline scenario is quite conservative. However, to maintain analytical rigor, we will use its $1.9 trillion prediction as a basis for estimation.

2. What market share will Circle’s USDC hold?

Currently, Circle’s USDC accounts for 25% of the stablecoin market, second only to Tether’s USDT.

(Why not invest in Tether? You can’t, because it is a private company.)

Stablecoin Market Capitalization Distribution

Source: Bitwise Asset Management, data from The Block. Timeframe: January 1, 2020, to March 23, 2026.

Note: “Others” include BUSD, CRVUSD, DAI, FDUSD, FEI, FRAX, GHO, GUSD, LUSD, MIM, PYUSD, TUSD, USDD, USDE, USDP, and USDS.

A common view is that as large corporations like Bank of America, Stripe, and Wells Fargo enter the stablecoin space, Circle’s market share will gradually shrink.

I am skeptical about this. Historically, innovators often maintain their early market leadership well.

For example:

• In 1976, an obscure company called Vanguard launched the world’s first index fund. Today, Vanguard manages more passive assets than any other institution globally.

• In 1993, State Street launched the first U.S. exchange-traded fund (ETF)—SPY—when it was not a giant in the asset management industry. Today, it remains the most actively traded ETF in the world, managing over $650 billion in assets.

• In 1996, an obscure asset management firm, Barclay Global Investors (BGI), launched the first series of international ETFs. BGI was eventually acquired by BlackRock for $12 billion, and this small business grew into iShares, now managing $5 trillion in assets.

We have even seen early signs that Circle can comfortably face competition from well-known companies in the stablecoin space. In 2023, one of the world’s largest digital payment companies, PayPal, launched its stablecoin PYUSD with great fanfare. However, this issuance ultimately received a tepid response, and PYUSD now holds just over 1% of the market share.

Of course, there are also examples in other sectors where giants have crushed early pioneers after entering the market. For instance, in the money market fund sector, later entrants (like Fidelity, Vanguard, and Federated Hermes) have taken most of the market from the original innovator, Reserve Fund Group. This is noteworthy, especially considering the similarity between money market funds and stablecoins: both attract dollar funds and invest them in high-quality short-term securities like U.S. Treasury bills.

Nevertheless, I still doubt that large banks will completely crush Circle. Circle’s market share could also expand. After all, while Circle “only” holds 25% of the entire stablecoin market, its share in the regulated stablecoin market is likely much larger. (Tether’s USDT dominates the offshore market.) While it’s challenging to obtain precise data on Circle’s share in the regulated market, I estimate that this percentage exceeds 80%. If you believe that most of the growth in stablecoin AUM will come from these markets (as banks, fintech companies, and large corporations choose onshore, regulated stablecoins), then Circle’s market share could significantly exceed the current 25%.

However, for the purposes of this analysis, we will again take a conservative approach. Let’s balance these two forces and assume that Circle will maintain a 25% market share in the future.

3. What will the profit margins be?

The final question is undoubtedly the most challenging and crucial: How much revenue will Circle earn from deposits?

Currently, Circle earns interest income from all U.S. Treasury securities backing USDC. At current interest rates, this means it has a yield of about 4% on $80 billion in assets under management.

However, this figure exaggerates Circle’s actual revenue potential. You must consider the distribution fees Circle pays to attract managed assets. For example, USDC was co-developed with Coinbase and is the exchange’s flagship stablecoin. As part of the collaboration agreement, Circle pays all interest income generated from USDC on the Coinbase platform to Coinbase, which largely passes that on to users. Circle has also established distribution agreements with other exchanges. Here, Circle bets that by paying some distribution fees, it can kickstart a marketing flywheel that directly attracts assets—at which point it can earn more revenue or monetize those assets in other ways in the future.

Overall, Circle currently pays about 60% of its revenue to distribution partners. This means that, at the current interest rate level, its actual “take rate” is about 1.6%.

Is this rate sustainable? There are two key factors to consider.

The first is interest rates. Circle’s interest income is directly tied to prevailing rates. A rate hike by the Federal Reserve benefits Circle, while a rate cut is detrimental.

The second is competition. Imagine a world with hundreds of stablecoins, where consumers frequently switch between USDC, WFUSD, BAUSD, PYUSD, and other products; Circle’s ability to retain interest income will be limited. In theory, competition will compress profit margins. This is a fundamental principle of Economics 101.

However, I am skeptical about this. Markets that “should” be perfectly efficient often are not. Charles Schwab earns billions each year from the spread between the rates it pays depositors and the returns on invested funds—despite customers being able to easily switch to higher-yielding products with just a click. But customers do not always do this because their core value proposition is not interest, but convenience, trust, and integration. In many ways, USDC is similar: people hold it because it can be used anywhere and is trustworthy, not because of the interest rate. This stickiness will not disappear overnight.

I would like to add that the current draft of the CLARITY Act may actually benefit Circle’s profit margins by increasing the difficulty for stablecoin holders to earn interest income.

That said, overall, I believe Circle’s profit margins will face greater pressure in the future as competition intensifies. It may even have to change how it generates revenue from users, and the company is actively working on this. For the purposes of this analysis, we will assume the take rate is halved to 0.8%.

Conclusion

Answering these three questions does not cover every aspect of Circle’s business. As I have hinted above, it has launched its own blockchain, consistently innovates in payment technology, and is seeing rapid growth in non-interest income. However, I believe these three questions form an efficient 80/20 rule for analyzing this stock.

Based on my simple estimates—$1.9 trillion market size, 25% market share, and 0.8% profit margin—after accounting for distribution fees, Circle’s revenue will reach $3.8 billion by 2030, excluding other expenses. Currently, the company’s actual operating expenses are relatively low (projected at $144 million in 2025), which means that even if these expenses double or triple by 2030, approximately $2.7 billion of that revenue will still be left as net profit after taxes. Using the current average price-to-earnings ratio of the S&P 500 (28 times), Circle’s market value would reach $75 billion.

This number is interesting, about twice its current market value. That’s already quite impressive—but you may ask, given its volatility, is it worth it?

I want to point out that at every step of my analysis, I have chosen conservative assumptions. If the growth of stablecoins reaches Citigroup’s optimistic scenario, or if Circle’s market share expands further (as it has recently), or if the company maintains its current take rate or finds new sources of revenue, then its value could be much higher.

Ultimately, I can imagine Circle’s value being far higher than my rough estimate of $75 billion by 2030, and I can also imagine its value being lower than this target. What I appreciate about this analysis is that it suggests the current valuation is reasonable. If the development of stablecoins unfolds as people expect, even while maintaining conservative assumptions in most areas, you will still find Circle to be quite attractive.