CRCL hits a new low in issuance, CIRCLE struggles with profitability bottleneck: In-depth analysis of the stablecoin market in January 2026.
Execution Summary
CRCL (Circle/USDC) is facing dual pressures: shrinking issuance and a bottleneck in its profit structure . In January 2026, USDC's total value locked (TVL) fell to $70.98 billion , a 9.02% decrease from its December 2025 peak of $78.02 billion , marking a new low. During the same period, the average daily transaction volume was $594 million (peak $1.3 billion, trough $140 million), showing a fluctuating downward trend, reflecting a significant slowdown in circulation activity. Circle's revenue capacity also weakened, with average daily revenue falling to $6.08 million in January (a month-on-month decrease of 13.96%), revealing its over-reliance on reserve interest and the constraints of its 50% revenue-sharing mechanism with Coinbase. In contrast, Tether, with its diversified reserves and higher profit margins, continues to maintain an advantage in valuation competition (Circle's valuation fell from $23 billion to $18.5 billion) and market share battles.
Key Indicator Analysis
USDC issuance and circulation shrink (December 2025 - January 2026)
| index | December 2025 | January 2026 | range of change | Trend Judgment |
|---|---|---|---|---|
| TVL peak | $78.02 billion | - | - | Downward |
| TVL minimum value | - | $70.98 billion | - | New low |
| Overall TVL decrease | - | - | -9.02% | Accelerated shrinkage |
| Average daily transfer volume | Not provided | $594 million | - | Oscillating downward |
| Peak daily transfers | Not provided | $1.3 billion | - | High liquidity volatility |
| Lowest daily transfer value | Not provided | $140 million | - | Low activity |
Circulation Analysis : The 7-day moving average of January transaction volume shows a continuous downward trend, with a tenfold difference between the peak (1.3 billion) and the trough (140 million), indicating high volatility and structural outflows in USDC use cases. On-chain holdings distribution shows that the main holders are cross-chain bridge contracts (Polygon and Avalanche bridges account for over 3.7%) and DeFi protocols (Aave holds 0.97%). No abnormal outflows from exchange reserves were observed, indicating that the contraction is mainly due to weakened demand from on-chain applications rather than panic redemptions.
Quantitative Verification of Circle's Profitability Bottleneck
| Financial indicators | December 2025 average | January 2026 average | Month-on-month change | core issues |
|---|---|---|---|---|
| Revenue | US$7.071 million/day | USD 6.084 million/day | -13.96% | Revenue decline |
| Fees | US$7.071 million/day | USD 6.084 million/day | -13.96% | Profit contraction |
| TVL Mean | $77.95 billion | $71.49 billion | -8.29% | Interest base erosion |
The flaw in Circle's profit model lies in its heavy reliance on interest income from its reserve assets (96% of its total revenue of $740 million in Q3 came from interest), yet it shares profits 50/50 with Coinbase (50% of USDC interest income outside the platform goes to Coinbase). This revenue-sharing model can be masked during periods of TVL growth, but it amplifies profit pressure during periods of contraction. In contrast, Tether does not need to share profits and has a more diversified reserve asset portfolio (including high-yield assets such as gold), resulting in a clear profit margin advantage.
Market competition and valuation pressure
A comparison of the two leading stablecoins
| Dimension | Circle (USDC) | Tether (USDT) | Competitive disadvantages |
|---|---|---|---|
| Valuation trend | $23 billion → $18.5 billion (-19.6%) | 300 billion → 500 billion (report) | Valuation gap widens |
| Profit Model | Interest income + profit sharing constraints | Interest income + transaction fees + no profit sharing | rigidity of pattern |
| Reserve Structure | 100% Short-Term US Treasuries + Cash | US Treasury bonds, gold, commercial paper, etc. | Revenue Flexibility |
| Compliance Status | National Trust Bank License | Offshore dominance + US compliance attempts | Two-front operations |
Circle obtained a National Trust Bank license from the Office of the Comptroller of the Currency (OCC) in December 2025, but its compliance advantage has not translated into a commercial advantage . Instead, the GENIUS Act requirements (100% high-quality reserves, monthly audits) have limited its asset allocation flexibility, while Tether is simultaneously pursuing a dual-track strategy of offshore (USDT) and US compliance (USAT), achieving a market share of 46-48% in emerging markets such as India and Argentina, and eroding USDC's position through scenarios such as crypto cards.
Structural risk analysis
Internal bottlenecks
- Income stream imbalance : Over-reliance on interest income, with negligible contribution from agreement fees (transfer fees, etc.) (approximately $6 million per day), resulting in poor resilience to interest rate fluctuations.
- Revenue sharing drags down the market : Coinbase's revenue sharing mechanism creates a double squeeze (both volume and price fall) when TVL shrinks.
- Issuance contraction : A decrease in TVL directly reduces the interest base, creating a negative feedback loop.
External competition
- Tether's overwhelming advantages : leading in valuation, profit, and market share, and offering higher reserve returns.
- Emerging stablecoins are on the rise : USDE, DAI, and other mechanism-based stablecoins are bucking the trend with growth (monthly increase of 1.8%-4.3%), while USD1 surged 63% in a single month.
- Regulatory costs : High compliance requirements increase operating costs and limit the scope for optimizing asset allocation.
Market Impact and Outlook
In the short term (Q1 2026) : USDC issuance may continue to decline, and if TVL falls below the psychological threshold of $70 billion, it could trigger wider concerns. Circle needs to accelerate its exploration of non-interest income (such as institutional custody services), but this transformation will take time.
Mid-term (second half of 2026) : The stablecoin battlefield will become more clearly differentiated.
- In the compliance arena , Circle, Fidelity (FIDD), and Tether USAT are engaged in fierce competition, but profit margins are being squeezed by regulations.
- Offshore Market : Tether's dominant position is hard to shake, especially in Asia where it holds over 90% market share.
- Mechanism Innovation : USDE, DAI, and others strive for differentiated advantages through algorithmic and collateral innovations.
Key turning point : If the Fed's rate-cutting cycle continues, Circle's interest income may contract further, exacerbating its profitability bottleneck. Unless it can significantly increase the proportion of non-interest income or renegotiate profit-sharing terms, the valuation pressure is unlikely to fundamentally improve.
Conclusion: The Challenge of Breaking Through Bottlenecks
Circle's current predicament is structural rather than cyclical : the shrinking issuance volume exposes its business model's reliance on scale growth, while the profitability bottleneck reveals institutional flaws in its single revenue source and profit-sharing mechanism. Under the dual pressure of Tether's overwhelming advantage and the rise of emerging stablecoins, simply relying on compliance advantages is no longer sufficient to maintain competitiveness.
Breakthrough paths : ① Develop revenue streams other than interest (custody, payment services); ② Optimize profit-sharing structure; ③ Expand into non-USD stablecoins and on-chain application scenarios. Otherwise, USDC may slide from one of the two leading stablecoins to the second tier, further widening the valuation gap with Tether.
Data Source Notes : All data is current as of January 30, 2026, based on TokenTerminal protocol metrics and on-chain data analysis. CRCL refers to the Circle/USDC ecosystem and is not an independent token. Valuation data is derived from public market reports and financial filings.