CRCL stock plummets 75%! Stablecoin No.2 Circle faces its "darkest moment" on the US stock market

The stock price of Circle, the world’s second largest stablecoin issuer, has plummeted from $299 to $76, a staggering 75% drop in just a few months, trapping a large number of investors. Behind the collapse of CRCL stock is the stablecoin business model being hit by both the rate-cut cycle and the tokenization of RWA money market funds. Institutional calculations show that for every 1% rate cut by the Fed, Circle’s revenue drops by 27%.

Circle vs Tether: The Good Kid vs. Gambler Business Model Showdown

To understand the reason behind CRCL stock’s plunge, we must first look at the two giants of the stablecoin industry. Global leader Tether issues USDT, with a market share of over 60% and $180 billion under management. Circle’s USDC holds a 24% market share, making it a perennial runner-up.

The stablecoin operating principle is simple: for every $1 invested by a user, the issuer puts $1 into a regulated account. The stablecoin itself pays no interest, but the issuer invests the dollars to earn a spread. In theory, a fully compliant USD stablecoin should invest all funds in low-volatility assets like short-term US Treasuries to ensure full redemption.

However, Tether does not fully comply! It invests just over 70% of funds in Treasuries, with the rest going into gold, Bitcoin, and loans, trying to earn extra returns. This share of risk assets has even increased from 17% last year to 24% this year. Tether’s gold and Bitcoin holdings are now about $22–23 billion, and in addition to the $180 billion in USDT collateral, it has about $6.8 billion in excess reserves.

This means if these assets drop by more than 30%, shareholder capital would be wiped out, excess reserves would be gone, and it would no longer be fully backed 1:1. If a major liquidity crisis hit and many people rushed to redeem USDT, triggering a run, forced asset sales could cause Tether’s ultimate crisis. Tether’s business model is fundamentally a gamble on “time”: betting that gold and BTC will rise long-term faster than they’ll crash or that a run will hit in the short term.

By contrast, Circle is your typical “good kid next door.” You give it a dollar, it gives you a USDC token, and it invests all funds honestly in short-term US Treasuries, earning only the Treasury spread. 99% of Circle’s revenue comes from this; it is also 100% bank-regulated and thoroughly audited. Tether is a partly transparent black box, while Circle is a transparent box everyone can see. Therefore, Circle is the most officially recognized stablecoin issuer, and many financial institutions prefer it for stablecoin settlements.

Three Deadly Reasons for CRCL Stock’s Crash

(Source: Trading View)

Despite being a rising star and compliant stablecoin giant in a new industry, Circle’s stock has crashed 75% in just a few months. Circle’s current revenue formula is very simple: Revenue ≈ USDC supply × Treasury yield × 40%. Why multiply by 40%? Because USDC is actually co-issued by Circle and the largest compliant US crypto exchange, with both splitting the interest income; a portion is also entirely paid to the exchange, so it nets to 40%.

Reason 1: Rate-Cut Cycle Severely Hits Interest Income

Circle’s boom over the past two years was due to both rapid USDC growth and Fed rate hikes, allowing it to earn interest spreads effortlessly. Now, the trend has reversed: rate-cut expectations are fully priced in, US job data is declining, and rate cuts are a major trend. Short-term Treasury rates have already dropped from a peak of 5.5% to 4% over the past year. Institutional analysis shows that for every 1% drop in rates, Circle’s revenue falls by 27%! If rates continue falling due to the rate-cut cycle, Circle’s performance will decline further.

Reason 2: Ongoing Crypto Downturn Impact

The persistent decline in the crypto market has also dealt a major blow to Circle. When the crypto market is sluggish, stablecoin demand drops accordingly, as investor appetite for crypto assets falls. This causes USDC’s circulating supply growth to stall or even contract, directly impacting Circle’s revenue base.

Reason 3: Threat from RWA Money Market Fund Tokenization

The biggest market risk not fully priced in is if tokenized RWA money market funds replace a large share of USDC, which would be a major problem. Just as the rise of Yu’e Bao in China hit bank demand deposits, if stablecoins can be instantly and smoothly converted into interest-bearing money market fund RWAs, almost all idle stablecoins would be converted to RWA tokens, dealing a huge blow to stablecoin supply! Historically, when banks and brokerages launched automatic sweep-to-money-market services, this “sleeping income” was slashed, potentially causing Circle and Tether’s profits to drop by up to 50–80%.

2030 Scenario Forecasts and Investment Advice

While stablecoin growth is all but certain—currently at a $300 billion market cap and widely expected to top $1 trillion (even $3–4 trillion in optimistic forecasts) by 2030—the degree to which this will boost net profits for spread-dependent Circle is highly uncertain.

Extremely Bearish Case: CRCL Stock Drops Another 67%

Assume that by 2030, due to RWA money fund tokenization, stablecoin market cap is just $500 billion and Circle’s share drops to 15% ($75 billion). With a neutral interest rate of 3%, revenue is $2.25 billion; after $1.35 billion in distribution costs and $500 million in operating costs, net profit is just $400 million. At a 15x P/E, market cap would be $6 billion, down 67% from now.

Base Case: CRCL Stock Rises 210%

Assume by 2030, stablecoin market cap is $1 trillion, Circle’s share remains at 24% ($240 billion). With a neutral interest rate of 4%, revenue is $9.6 billion; after $5.8 billion in distribution costs and $1 billion operating costs, net profit is $2.8 billion. At a 20x P/E, market cap would be $56 billion, up 210% from now.

Extremely Bullish Case: CRCL Stock Soars 1700%

Assume by 2030, stablecoin market cap exceeds expectations to reach $2 trillion, Circle’s share rises to 30% ($600 billion). With a neutral rate of 5% (minor rate hikes due to inflation), revenue is $30 billion; after $15 billion in distribution costs and $2 billion operating costs, net profit is $13 billion. At a 25x P/E, market cap would be $325 billion, up 1700% from now.

The future of CRCL stock is highly uncertain, with both downside and upside potential. Without deep understanding, it’s best to stay away. If you are truly optimistic, perhaps treat it like a lottery ticket.