Circle Doubling in a Month, What's the Market Betting On?

In June of last year, Circle went public at $31 per share. Two weeks later, the price touched $299. Then, it dropped back to $50, a drop of over 80%. Then, the February earnings report came out, doubling in two weeks, today at $111.

During this doubling period, Bitcoin dropped by 40%. Circle's stock price decoupled from the crypto market.

「You're witnessing that kind of decoupling」

The drop to $50 was not hard to understand within the industry.

In September and October 2025, the Fed cut rates by 25bp twice, bringing the benchmark rate to 3.75%. The reserve yield followed suit, Q3 data showed the USDC unit reserve yield declined by 96 basis points year-on-year.

What does this 96 basis points mean? Circle did the math in its prospectus, for every 100bp rate cut by the Fed, the annualized interest income loss is about $618 million. Half of the loss will be offset due to cost allocation linked to the decline, with a net loss of about $300 million. However, this is only a static calculation, assuming the USDC scale remains unchanged. In 2025, the Fed cut a total of 75bp, and based solely on the interest rate as a variable, nearly $200 million was taken from Circle's annual income.

There's more. There is a revenue-sharing agreement between Circle and Coinbase. All reserve revenue generated by USDC held on the Coinbase platform goes to Coinbase, with a fifty-fifty split for off-platform holdings. Total reserve revenue for Q4 was $733 million, with distribution costs of $461 million, leaving Circle with a net reserve revenue of $273 million. Non-interest income was $37 million, less than 5% of total revenue.

This structure is the fundamental reason why Circle's stock price dropped from $299 to $50. Rate cuts compressed the reserve yield, the fixed split structure with Coinbase, and Circle stuck in the middle, with a clear ceiling on how much revenue it can generate and a clear floor on how much profit it can retain.

But on February 25, the earnings report came out, and Circle surged 35% in a single day.

EPS was $0.43, analyst expectations were $0.16. It was not a slight beat but a face-smacking beat. However, what drove the repricing was not just the numbers in this report but a larger structural fact, with this report only making the market see it clearly for the first time.

In 2025, the entire crypto market cap dropped over 40% from its peak. During this period, USDC's circulation increased by 72% to reach $75.3 billion, hitting a new all-time high. The total stablecoin market cap also surpassed $314 billion during the same period, another all-time high.

Not a tailwind in a bull market, but a contrarian move in a bear market.

The significance of this event is fundamental to Circle's pricing logic. The previous market valuation framework for CRCL treated it as a beneficiary of the crypto cycle, where in a bull market, everyone trades using USDC, driving up volume, and in a bear market, on-chain activity decreases, leading to a volume reduction. This was Coinbase's logic—transaction volume is key, and in a bear market, transaction fee revenue plunges.

However, the 2025 data negated this framework. USDC's growth did not halt in the bear market; not only did it not stop, but it also accelerated.

Circle CEO Allaire made a statement during the earnings call, "You are seeing that decoupling." He was referring to the decoupling between BTC and stablecoins. But the unfinished part of his sentence is that the use case for stablecoins is shifting from a unit of account for crypto transactions to a global payment settlement infrastructure.

The driving force is no longer speculative trading demand but a wave of participants who have never been in the crypto race before. Visa announced an expansion of USDC settlement capabilities, allowing U.S. Visa issuing banks to settle transactions using USDC outside normal banking hours, with Mastercard following suit. JPMorgan Chase 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 personal customers, and Polymarket completed a large-scale migration using USDC as the core settlement asset.

This is not native crypto users depositing and withdrawing. 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 global payment volumes. The global cross-border payment market is approximately $150 trillion annually, while USDC's quarterly on-chain transaction volume is $11.9 trillion, a 247% year-over-year growth. These two figures cannot be directly compared, but the market is starting to price Circle based on the second framework.

GENIUS Act, and a Pure Play Ticket

There is a widely circulated saying on Twitter: "If your thesis is stablecoins eating global payments, CRCL is the most direct bet. COIN is a comprehensive entity that incidentally benefits from USDC fees, both of which are different tools corresponding to different topics."

This sentence explains why $CRCL was able to independently rally while Coinbase's stock price was flatlining. Coinbase operates an exchange, a wallet, a Base chain, and institutional custody, with USDC being one of its many business lines. Circle, on the other hand, focuses on one thing: issuing and circulating USDC. If you want to bet on the stablecoin track itself, there is only one pure target available in the market.

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 reserves backed by 100% cash or short-term government bonds and undergo regular audits. On the day the GENIUS Act was passed, $CRCL surged by 34% in a single day. 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 could not cross in the short term.

JPMorgan's data confirmed this assessment, showing that post-act passage, the stablecoin market grew by 19% overall, USDC's market share rose from 24% at the beginning of the year to 25.5%, and Tether dropped from 67.5% to 60.4%. On-chain transaction volume numbers were even more direct, with USDC surpassing USDT in Q4, accounting for about 50% of stablecoin on-chain transaction volume. This was the first time in many years that Tether was overtaken in this dimension.

However, Tether did not concede defeat. After the GENIUS Act was passed, Tether launched USAT, bringing along Anchorage Digital and Cantor Fitzgerald, specifically designed reserves according to GENIUS standards. Bo Hines, the CEO leading USAT, is a former White House crypto advisor. Currently, USAT has a circulation of around $20 million, almost negligible compared to USDC's $75.3 billion, but Tether boasts the world's largest stablecoin user network, and Cantor Fitzgerald brings in Wall Street relationships, making it a combination that cannot be underestimated.

Meanwhile, a group of names that have never appeared in the stablecoin track before have also entered the scene. Fidelity launched FIDD, running on Ethereum, with 100% GENIUS standard reserves, targeting institutional and retail customers. Robinhood and Revolut are reportedly developing their own stablecoins. JPMorgan Chase and US Bancorp are expanding their stablecoin plans. After acquiring Bridge, Stripe embedded a stablecoin settlement pipeline into its $1.9 trillion annual payment flow. Treasury Secretary Bessent stated that the U.S. stablecoin market could reach $37 trillion by the end of this decade. The current $75.3 billion value of USDC is less than 3% of this figure.

The GENIUS Bill didn't just open the door for Circle, it brought in the entire traditional financial system. The first-mover advantage is real: 30 blockchain-native assets, deep integration with Visa and JPMorgan Chase, years of built-up enterprise API infrastructure—these are not things a newcomer can replicate in just a year or two. Bernstein has a target price of $190, citing regulatory moats and competitive barriers in the tech stack.

However, the depth of the moat remains unknown until a real stress test occurs. There's also a question rarely discussed within the circle: both Circle and Coinbase's revenue-sharing contracts have fixed terms, and in the next renegotiation round, Coinbase's chips aren't fewer than they are now. The share of USDC held on their platform has increased from 5% in 2022 to the current 22%. The negotiation outcome will directly impact how much Circle can actually retain from USDC's growth.

$230 Billion Bet on an Unfolding Story

Today, half of Circle's valuation comes from a story that has yet to unfold.

Allaire spent a considerable amount of time during the earnings call discussing the payment needs of AI Agents. When AI Agents perform autonomous tasks, they require small, frequent, cross-border payments—calling APIs, purchasing compute, and settling across borders. Allaire refers to this scenario as the "machine economy," arguing that when the number of AI Agents surpasses human users, the primary users of the payment infrastructure will no longer be humans but machines.

These needs within the traditional payment systems are riddled with friction at every step. Credit cards have business hour limitations, manual authorization steps, and a fee structure that makes sub-$0.01 payments economically infeasible. Stripe charges a minimum of $0.30 plus 2.9% per transaction, while Visa and Mastercard's cross-border fees average 1.5%-3%, and bank wire transfers don't operate on weekends.

USDC doesn't have these limitations at a technical level—it settles 24/7, on-chain finality, and on high-speed chains like Solana, the cost per transaction is less than $0.001, with Arc targeting $0.00001. Circle has developed payment infrastructure specifically for AI Agents, with the Arc testnet already live. This isn't a "slightly cheaper" improvement; it's an order of magnitude difference in the entire cost structure.

Mark Palmer, an analyst at Benchmark-StoneX, puts it bluntly: "AI Agents need programmable money that can be embedded directly into software workflows, without long settlement windows," whereas card networks' infrastructure is designed for human checkout processes, not for machines.

This demand's authenticity can be seen in the protocol layer's speed of action.

In May 2025, Coinbase launched the x402 protocol, using the long-dormant HTTP 402 status code to enable AI Agent automatic payments, allowing servers to request a USDC payment before responding to a request without manual authorization. Five months later, x402 processed over 100 million transactions. Google introduced AP2 (Agent Payment Protocol), and OpenAI tested "Instant Checkout" in ChatGPT, backed by a combination of Stripe and the stablecoin rails. These are not whitepapers but infrastructure already operating in a production environment.

Visa's data provided an anchor point for scale perception. In November 2025, Visa's monthly stablecoin-settled traffic was annualized at around $3.5 billion, growing to $4.5 billion by January 2026. Compared to Visa's total annual transaction volume of about $16 trillion, this number is almost negligible. But the change in direction is more notable than the absolute value, as Visa itself is expanding this pipeline. Coinbase CEO Brian Armstrong also made a similar observation in early March, stating, "Soon, the number of transactions initiated by AI Agents will surpass those by humans."

The distance between narrative and reality is made very clear by the data.

The total transaction volume of x402 in the past 30 days was $24 million, involving 94,000 buyers and 22,000 sellers. Meanwhile, the global e-commerce market is estimated to be $6.88 trillion. McKinsey estimates that the current real-world payment utility of stablecoins is about $390 billion per year, with $226 billion in B2B and less in retail. ECB data shows that organic retail transfers account for about 0.5% of the total stablecoin volume.

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

Gartner predicts the AI Agent economy to reach $30 trillion by 2030, while Bessent forecasts the stablecoin market to reach $37 trillion by the end of this decade. If these numbers hold true, Circle's current $753 billion USDC circulation is indeed just the beginning. However, the path from $24 million in x402 monthly transaction volume to a $30 trillion Agent economy is uncharted.

A $230 Billion Market Cap Bet that this journey will be completed.

Circle went public in June last year at $31, shot up to $299 two weeks later, then fell back to $50, and has now doubled again. There is a question embedded in this curve that has never really been answered: What, ultimately, is Circle? Is it an interest-rate-arbitrage business, a compliant stablecoin infrastructure, or a settlement layer for the AI economy? Allaire says, "You're seeing that decoupling," but decoupling to where is another question.