Even with the CLARITY Act exerting pressure, is the market overreacting to Circle's stock price?

Written by: Matt Hougan, Bitwise

Translated by: AididiaoJP, Foresight News

Even considering recent concerns sparked by the CLARITY Act, under conservative assumptions, I estimate that by 2030, Circle’s valuation could reach $75 billion.

One of the most common questions we get is: “How should I invest in stablecoins?”

Typically, we recommend focusing on crypto assets that support the stablecoin ecosystem, such as Ethereum, Solana, and Chainlink, or on crypto companies operating in this space, like Circle and Coinbase. Since it’s difficult to predict who will benefit most from the rise of stablecoins, some believe that investing across the entire sector is a reasonable approach.

However, among the many options, one opportunity stands out: Circle—the issuer of USDC, the world’s second-largest stablecoin. It is the only company that is publicly listed and solely focused on stablecoins. In my view, this makes it the most straightforward choice.

So, is Circle a worthwhile investment?

Today is a good day to answer that question, as the stock has recently fallen sharply (20% drop on Tuesday), due to news that the latest draft of the CLARITY Act imposes restrictions on platforms paying interest income to stablecoin users. I believe the market’s reaction was somewhat excessive.

To illustrate this point, it’s necessary to look at Circle’s future from a macro perspective.

Three Key Questions That Will Determine Circle’s Future

1. How large will the stablecoin market become?

The first question concerns the potential growth of the stablecoin market. Various forecasts exist, with the most widely cited being a report from Citigroup. The “base case” predicts that by 2030, the total assets under management in stablecoins will reach $1.9 trillion; in a “bull case,” up to $4 trillion.

The CLARITY Act news has not changed these baseline forecasts. So far, interest income has not been a primary driver of stablecoin growth; currently, most stablecoins do not generate interest for holders. The popularity of stablecoins lies in their ability to facilitate efficient, reliable global transfers—useful for trade settlement, collateral for lending, and as an alternative to unstable fiat currencies.

Convenience is the core value proposition of money, and that’s where stablecoins excel. Currently, the average yield on U.S. savings accounts is about 0.60%, and on checking accounts around 0.07%. People hold funds in these accounts not for yield but for access and liquidity. As the global financial system continues to migrate toward blockchain-based infrastructure, I expect stablecoins will play an increasingly important role, regardless of whether they pay interest.

In my view, Citigroup’s baseline forecast is actually quite conservative. Nonetheless, to maintain a conservative approach, we’ll use $1.9 trillion as the basis for further estimates.

2. What market share will USDC hold?

Currently, Circle’s USDC accounts for about 25% of the total stablecoin market, behind Tether’s USDT.

(Why not invest in Tether? Because Tether is a private company and not publicly investable.)

Market share distribution of stablecoins

Source: Bitwise Asset Management, data from The Block. Data coverage: Jan 1, 2020 – Mar 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 institutions like U.S. banks, Stripe, and Wells Fargo enter the stablecoin space, Circle’s market share will decline gradually.

I am more cautious. Historically, innovative companies often defend their early market positions well.

For example:

• In 1976, the world’s first index fund was launched by an obscure firm called Vanguard. Today, Vanguard leads in passive asset management globally.

• In 1993, the first U.S. ETF, SPY, was launched by State Street, then not a giant in asset management. Today, SPY remains the most traded ETF worldwide, with over $650 billion in assets.

• In 1996, the first series of international ETFs was launched by an unknown firm called Barclays Global Investors, which was later acquired by BlackRock for $12 billion. Its iShares product now manages $5 trillion.

We are already seeing early signs of Circle resisting competition from well-known firms: in 2023, PayPal launched its stablecoin PYUSD, but market response has been tepid, with PYUSD’s market share just over 1%.

Of course, there are cases where large firms eventually overtake early movers. For example, in the money market fund sector, Fidelity, Vanguard, and Federated Hermes quickly gained market share from the original innovator, Reserve Fund Group. This is noteworthy because money market funds and stablecoins share similarities: both attract dollar funds and invest in short-term, high-quality securities like U.S. Treasuries.

Nevertheless, I don’t believe large banks can easily crush Circle. I think Circle’s market share could also expand. Although it currently accounts for about 25% of the overall stablecoin market, in the regulated segment, its share is likely much higher (Tether’s USDT mainly dominates offshore markets). While exact data on Circle’s share in the regulated market is hard to obtain, I estimate it exceeds 80%. If growth in stablecoin assets mainly occurs in the regulated market—since banks, fintechs, and large corporations prefer onshore, regulated stablecoins—Circle’s market share could significantly surpass its current 25%.

However, for the sake of a conservative analysis, I will assume Circle maintains its 25% market share in the future.

3. What will be Circle’s profit margin?

The most complex and critical question: how much income can Circle generate from its deposit assets?

Currently, Circle earns all interest income from U.S. Treasuries backing USDC. At current rates, this means its $80 billion in assets under management can generate about 4% annually.

But this figure doesn’t fully reflect Circle’s actual earning capacity, as it must also consider the distribution costs paid to acquire these assets. For example, USDC was co-developed with Coinbase and is the exchange’s flagship stablecoin. Under the agreement, Circle pays Coinbase all interest income generated from USDC held on its platform, which Coinbase then largely passes to users. Circle also has distribution agreements with other exchanges. This approach aims to create a positive feedback loop: by paying distribution channels, Circle can attract assets directly, increasing its income share or monetizing assets through other means in the future.

Overall, Circle currently pays about 60% of its income to distribution partners. This means its effective “revenue rate” is roughly 1.6% under current interest rates.

Is this sustainable? Two main factors need to be considered:

First, interest rates. Circle’s interest income is directly linked to market benchmark rates. Fed rate hikes benefit Circle; rate cuts hurt.

Second, the competitive landscape. Imagine a market with hundreds of stablecoins, where users can freely switch among USDC, WFUSD, BAUSD, PYUSD, and others. In such a scenario, Circle’s ability to maintain its interest income would be limited. Basic economic principles suggest competition will compress profit margins.

However, I am skeptical. Markets that are “perfectly efficient” in theory often aren’t in practice. Charles Schwab, for example, profits billions annually from the spread between the interest it pays depositors and the interest it earns from investments, despite customers easily switching to higher-yield alternatives. Customers don’t always act because their value proposition isn’t just yield—it’s convenience, trust, and integration. USDC shares these qualities: users hold USDC mainly for its broad utility and credibility, not for interest. This user stickiness is unlikely to disappear in the short term.

I also want to point out that the current draft of the CLARITY Act might actually have a positive effect on Circle’s profit margins, as it makes paying interest to stablecoin holders more difficult.

Overall, I believe that as competition intensifies, Circle will face greater pressure on its profit margins. The company may even need to adjust its revenue model, which is something Circle is actively exploring. For this conservative analysis, I will assume its interest rate drops by half, to 0.8%.

Conclusion

Answering these three questions doesn’t fully capture Circle’s business. As mentioned earlier, Circle has launched its own blockchain and continues to innovate in payments technology, and its non-interest income is growing rapidly. But I believe that examining these three aspects provides an effective 80/20 analysis of its stock value.

Based on these conservative assumptions—$1.9 trillion market size, 25% market share, and a 0.8% profit margin—its revenue before distribution costs and other expenses would be $3.8 billion. Currently, the company’s operating expenses are relatively low, at about $144 million in 2025. Even if these costs double or triple by 2030, after taxes, there would still be roughly $2.7 billion in net profit. Using the current S&P 500 average P/E ratio of 28, this implies a valuation of $75 billion for Circle.

This figure is roughly double the company’s current valuation. It’s a decent performance, but given market volatility, whether it’s worth investing warrants further consideration.

It’s important to note that every assumption in this analysis has been conservative. If stablecoin growth reaches Citigroup’s bullish scenario, or Circle’s market share increases (as recent performance suggests), or the company manages to maintain current interest rates or develop new revenue streams, the valuation could be significantly higher.

Overall, I can envision Circle’s value in 2030 being well above my rough estimate, or possibly below it. The value of this analysis lies in showing that Circle’s current valuation is within a reasonable range. If stablecoin development aligns with market expectations, even with conservative assumptions, Circle remains an attractive investment opportunity.