Author: Thejaswini MA
Original title: Circling Back to Circle
Compiled and edited by: BitpushNews
There is a type of company that actually profits when global situations deteriorate: defense contractors, oil giants, and gold miners. These are obvious examples whose business models inherently presuppose instability and translate that risk into pricing.
Circle shouldn't belong to this category. Its token was designed to always be equivalent to $1. Stability is the entirety of its product's meaning.
However, Circle's stock price has surged from $49.90 on February 5 to around $123 today, more than doubling in just five weeks. Meanwhile, the broader cryptocurrency market is still 44% below its peak levels last October.
A company whose products aim to maintain price stability has become the most sought-after trading target in the market due to a more volatile world.
This article will explain the reasons behind this phenomenon and the difference between Circle's true nature and its current market pricing.
What exactly is a Circle? (Let's get back to the basics)
Strip away the branding, payment narrative, and infrastructure pitches, and what you're left with is this: Circle holds U.S. Treasury bonds. Every dollar of USDC in circulation is backed by one dollar held in short-term government bonds. Circle receives the interest on these bonds. This accounts for roughly 90% of the company's revenue in any given quarter. Once you see that, its business model isn't complicated: Circle is a money market fund that issues stablecoins .
This means Circle's revenue has only one key variable: the federal funds rate. When interest rates are high, Treasury yields are higher, and Circle earns more revenue for each USDC in circulation. When interest rates fall, revenue shrinks. Everything else is just fluff.
The following is the chain reaction that led to the stock price rebounding 150% from its February lows:
According to @finance.yahoo, the conflict in Iran has driven oil prices up by about 35% since February 28. Oil prices exceeding $100 indicate inflation concerns, which in turn suggest that a rate cut by the Federal Reserve would appear reckless. The decision to keep interest rates unchanged on March 18 was never truly questioned. Even before the war broke out, CME FedWatch showed a greater than 90% probability of rates remaining unchanged.
What war truly altered was the year-end forecast. Before the conflict, the market priced in two 25-basis-point rate cuts in 2026. After the conflict, this expectation dropped to one, and was postponed no earlier than September. The probability of no rate cuts at all in 2026 roughly doubled. As interest rates remained high for a longer period, Circle's Treasury reserves continued to generate returns. More returns meant more revenue, and more revenue meant a higher stock price. The war broke out, and a stablecoin issuer became a beneficiary. This statement never appeared in anyone's forecasting models.
Background Information: The bearish logic that kept Circle's stock price at $49 in February was essentially a bet on interest rate cuts. The market at the time predicted multiple rate cuts by the Federal Reserve in 2026, which would directly reduce Circle's reserve income. A rough estimate: with the current USDC supply of $79 billion, every 25 basis point rate cut would result in an annualized revenue loss of approximately $40 million to $60 million for Circle. Two rate cuts would wipe out nearly $100 million in top-line revenue by the end of the year. The war rendered this calculation meaningless overnight. Not because Circle changed, but because the macroeconomic context that would have weakened its argument no longer existed.
How does a short squeeze begin?
While the interest rate narrative supported the stock price, the initial surge stemmed from position building.
Prior to the release of its fourth-quarter earnings report on February 25th, approximately 17.8% of Circle's outstanding shares were short. Hedge funds had established substantial bearish exposure. Their argument was that interest rates would eventually fall, reserve income would be compressed, and the company's revenue had no floor independent of interest rates. From a fundamental perspective, this was hard to refute. Subsequently, Circle reported earnings per share of $0.43, while the market consensus was $0.16. Revenue reached $770 million, exceeding the expected $749 million. On-chain USDC trading volume approached $12 trillion quarter-over-quarter, a year-over-year increase of 247%. Short covering ensued. The stock surged 35% in a single day of trading. According to 10x Research, hedge funds estimated to have lost $500 million on their short positions that day. Subsequently, the battle for control of the stock price surged, fueled by the earnings report.
Coinbase Problem
There is a part here that is not mentioned in the bounce narrative.
Circle's net profit in 2025 was a loss of $70 million, not a profit. The fourth quarter performed exceptionally well, but the full year was not. To understand why, you need to understand its relationship with Coinbase, which is the most important and most underrated fact about Circle's business.
When USDC was initially launched in 2018, Circle and Coinbase formed a joint consortium to manage it. This consortium dissolved in 2023, and Circle gained full control over the issuance of USDC. However, Coinbase retained a share of the revenue.
Coinbase takes 100% of the profits from the USDC reserves held on its platform, splitting all remaining profits 50/50 with Circle. In 2024, this arrangement directly gave Coinbase $908 million of Circle's total $1.01 billion in distribution costs. Roughly speaking, about 54 cents of every dollar Circle earns goes to a company that neither issues tokens nor handles reserves. By early 2025, Coinbase held 22% of the total USDC supply, up from 5% in 2022. The more USDC grows on the Coinbase platform, the more Circle pays out.
According to @q4cdn.com, the partnership automatically renews every three years, and Circle cannot unilaterally withdraw. Any outcome of the next renegotiation will directly impact Circle's profit margins. In the fourth quarter of 2025, distribution costs alone reached $461 million, a 52% year-over-year increase. The full-year net loss of $70 million was partly due to a $424 million one-time equity compensation arising from the IPO, making the overall figures appear worse than the actual business situation. However, the actual business still faces a structural cost problem that cannot be fully resolved by any interest rate environment.
The market prices Circle as infrastructure. However, the profit and loss statement shows it as an interest rate trading instrument with expensive distribution costs. Both perspectives can hold true simultaneously. They simply have different pricing logics, and the market is currently paying for the "best version" of both.
Why this is more than just a macro trade
USDC's supply recently reached an all-time high of $79 billion, while the broader crypto market has fallen 44% from its October peak. This divergence is worth considering. Speculative assets typically decline when markets fall. USDC continues to grow because people are using it to transfer funds, not as a speculative bet.
Demand for USDC surged in the Middle East during the conflict in Iran precisely because traditional banking became unreliable. When normal channels are blocked, people use it for remittances and cross-border transfers. This is how payment infrastructure behaves under pressure: its usage increases, doesn't decrease.
Transaction data confirms this. In February alone, USDC processed approximately $1.26 trillion in adjusted transfers, compared to $514 billion for USDT during the same period. Tether (USDT) still has a market capitalization of $184 billion, while USDC has $79 billion. In terms of total supply, the two are incomparable. However, USDC is now transferring more funds than USDT.
As @visaonchainanalytics points out, "dormant supply" and "active settlement" are distinct concepts. The former indicates where people are storing dollars, while the latter shows which type of dollars people use when they need to transfer value.
Druckenmiller made some relevant arguments this week. In a Morgan Stanley interview recorded on January 30 and released on Thursday, he predicted that the global payment system would be running on stablecoins within 10 to 15 years, subsequently stating that cryptocurrencies are "a solution to a problem." The world's most trusted macro investor clearly divided the field in two: stablecoins are the inevitable infrastructure, while everything else is still looking for a reason to exist. This framework provides support for the bullish narrative.
Betting on infrastructure
Tokenized assets have grown from approximately $1.5 billion at the beginning of 2023 to approximately $26.5 billion today. Many such products, including BlackRock's BUIDL tokenized government bond fund with over $2 billion in assets, rely on USDC for creation, redemption, and settlement. Prediction markets processed over $22 billion in trading volume in 2025, the majority of which was settled in USDC (Polymarket alone). Visa now supports over 130 stablecoin-linked cards in 50 countries, with an annualized settlement volume of approximately $4.6 billion.
Circle is also building the infrastructure beneath all of this. The Circle Payments Network connects 55 financial institutions, processing $5.7 billion annually, allowing banks and payment service providers to transfer USDC across borders and directly convert it to local currency. Arc is Circle's proprietary Layer-1 blockchain, designed to fully support the institutional level. This is a settlement infrastructure that does not rely on Ethereum or Solana. While Ethereum and Solana currently have a negligible impact on revenue, both represent a future-oriented strategic move should interest rates decline.
While the AI tier is smaller in terms of transaction volume, it's structurally interesting. Data released by Circle's Global Head of Marketing in March showed that AI agents completed 140 million payments totaling $43 million in the past nine months. 98.6% of these were settled in USDC, averaging $0.31 per transaction. There are currently over 400,000 AI agents with purchasing power. Although the dollar amounts are still small, the trend is undeniable. If AI agents need to make frequent, sub-tiered payments to each other for computing power, data access, and API calls, they need a tool that can settle instantly with near-zero sending costs. Circle recently launched Nanopayments specifically to address this need: supporting gas-free USDC transfers as low as $0.000001, with off-chain packaging and batch settlement. The testnet already supports 12 chains, including Arbitrum, Base, and Ethereum.
This is Circle, a company the market is willing to pay $123 for: a company at the heart of tokenized finance, AI-powered business, cross-border payments, and prediction markets, with regulatory support from the GENIUS Act and the CLARITY Act highly likely to pass before summer. Bernstein has given it a price target of $190, while Clear Street has $136. Seaport Global, the most favored stock on Wall Street, has a price target as high as $280.
The lingering contradiction
Here, I'd like to frankly discuss a point that many observers often overlook.
Circle's profitability relies on maintaining high interest rates. This is not a permanent condition. The Federal Reserve will eventually cut interest rates. At that time, the yield on Treasury reserves supporting USDC will shrink, and Circle's interest income will also decrease.
Circle recognized this. It has been expanding into transaction fees, enterprise services, payment networks, and Arc—businesses that operate independently of the interest rate environment. But currently, these revenues are still small. Reserve income remains the main source of revenue.
Therefore, you will find that these two logics coexist in the same stock price, but they are not the same bet.
The infrastructure argument posits that USDC is becoming a true payment conduit. It is regulated, transparent, and increasingly deeply embedded in traditional finance, with a sticky embedding regardless of interest rates. This argument is supported by data: transaction volume figures, institutional integration, Druckenmiller's framework, and Macquarie's designation of stablecoins as the foundational layer of global financial infrastructure. If this argument holds true, Circle appears inexpensive in any interest rate environment because its potential market is the entire global payments system.
The interest rate trading theory argues that Circle is making a leveraged bet on "higher and longer interest rates," and that the stock price already reflects a scenario where the Federal Reserve will never make any substantial rate cuts. If this is the main driver of the price, then every future rate cut by the Fed will be a resistance level, and the stock price has already overdrawn the fundamentals under normalized interest rates.
Both viewpoints have been priced in. The war makes it difficult to discern which viewpoint the market is actually buying.
This is perhaps the most useful point for understanding CRCL (Circle stock ticker). The key isn't whether it will reach $190, but whether you're buying "infrastructure" or a "yield reseller who's learned to tell a good story." The former is a long-term position; the latter could collapse the moment Powell changes his mind.
Currently, the war keeps both sides thriving. Oil prices are accomplishing the most difficult task. And hidden in the cracks between these two scenarios lies the company's true value—it has figured out how to create a dollar-denominated internet currency, but now it must figure out how to survive the moment the dollar no longer generates 5% returns.
Twitter: https://twitter.com/BitpushNewsCN
BitPush Telegram Community Group: https://t.me/BitPushCommunity
Subscribe to Bitpush Telegram: https://t.me/bitpush
