There is a type of company that can actually increase in value when the world situation worsens: defense contractors, oil unions, and gold miners. These are all common examples, and their business models are fundamentally based on instability, converting this risk into pricing.
Circle does not belong to this category. Its token design is originally intended to always be equivalent to 1 dollar. Stability is the entire meaning of its product.
However, Circle's stock price has surged from $49.90 on February 5 to about $123 today, more than doubling in just five weeks. Meanwhile, the broader cryptocurrency market is still 44% lower than its peak level in October of last year.
A product designed to pursue price stability, but has become the hottest trading object in the market because the world has become more turbulent.
This article will explain the reasons behind this phenomenon and the differences between Circle's true nature and the current market pricing.
What exactly is Circle (let's return to basics)
Strip away the brand packaging, payment narrative, and infrastructure reference dictionary, and what remains is: Circle holds U.S. treasuries.
Every dollar of circulating USDC is backed by a dollar stored in short-term government bonds. The interest on these debts belongs to Circle. This accounts for about 90% of the company's income in any quarter. Once you see this, its business model is not complex: Circle is a money market fund issuing stablecoins.
This means a key indicator of Circle's revenue: the federal funds rate. When interest rates are high, treasury yields are only higher, and Circle earns more for each circulating USDC. When interest rates fall, revenue contracts. Everything else is just expansion.
Here are the chain reactions that led to a 150% rebound in stock price from February's lows:
According to @finance.yahoo, the Iranian conflict has pushed up about 35% since February 28. About over $100 means excessive panic, and excessive panic means that if the Federal Reserve cuts rates, it will expand recklessness. The decision on March 18 to keep rates unchanged was never truly questioned. Long before the outbreak of war, CME FedWatch showed that the probability of unchanged rates exceeded 90%.
What has truly changed is this year's expectations battle. Before the conflict, the market priced in two 25 basis point rate cuts in 2026. After the conflict, this expectation was revised once and prioritized to be postponed until after September. The probability of no rate cuts in 2026 has roughly doubled. As interest rates remain high for a longer period, treasury reserves of the circle continue to generate yields. More yields mean more revenue, more revenue means higher stock prices. The war broke out, and a stablecoin issuer became a beneficiary. This means it never appeared in anyone's predictive models.
Background Supplement: The bearish logic that kept Circle's stock price at $49 in February was essentially a bet on rate cuts.
At that time, the market predicted that the Federal Reserve would cut rates multiple times in 2026, which would directly compress Circle's foreign exchange income. Roughly speaking: at the current USDC supply level of $79 billion, every 25 basis point cut would lead to an annual income loss for Circle of about $40 million to $60 million. A double rate cut would wipe out nearly $100 million in top-line income before the end of the year. The war turned this calculation into nothing overnight. Not because of the circle, but because the macro background of what that argument is has become unrepeatable.
How a short squeeze begins
As the interest rate narrative supports the stock price, the initial surge came from position layouts.
Before the fourth quarter earnings report released on February 25, about 17.8% of Circle's circulating shares were shorted. Hedge funds established a large number of bearish recovery positions. Their argument is that interest rates will ultimately decline, domestic income will compress, and the company's income does not rely on the bottom line of interest rates. From a fundamental perspective, this is hard to refute.
Additionally, Circle announced a year-to-date earnings of $0.43, while the market had generally expected $0.16. Revenue reached $770 million, expected at $749 million. The on-chain USDC trading volume quarter-over-quarter approached $12 trillion, up 247% year-over-year. Short covering. The stock soared 35% in a single day's trading. According to 10x research data, hedge funds estimated losses of $500 million on short positions that day. Subsequently, the war followed up with earnings reports, triggering the baton.
Coinbase issues
Here is an update regarding the part mentioned in the narrative.
Circle's loss in 2025 is a loss of $70 million, not a profit. The fourth quarter was outstanding, but this year is not. To understand the reason, you need to grasp its relationship with Coinbase, which is the most important and underestimated fact about Circle's business.
When USDC was first launched in 2018, Circle and Coinbase formed a joint consortium to manage it. The consortium was disbanded in 2023, and Circle gained full control over USDC issuance. However, Coinbase retained the revenue source.
Coinbase took 100% of the USDC reserve earnings held on its platform, and all other earnings are shared 50-50 with Circle. In 2024, this arrangement directly donated $908 million of Circle's total allocation cost of $1.01 billion to Coinbase.
Roughly calculated, for every $1 of Circle's funds, 54 cents flow to a company that neither issues tokens nor handles reserves. At the beginning of 2025, USDC held by Coinbase accounted for 22% of total supply, up from 5% in 2022. The more USDC grows on the Coinbase platform, the larger the share of payments within the circle.
According to @q4cdn.com, the partnership automatically renews every three years, and Circle cannot unilaterally exit. Any results from the next renegotiation will directly affect Circle's profit margins. In the fourth quarter of 2025, the allocation cost alone will reach $461 million, up 52% year-on-year.
Currently, the $70 million net loss partly comes from the $424 million in stock-based compensation generated by the IPO, which makes the overall numbers look worse than the actual business situation. However, the actual business still faces a structural cost issue that cannot be fully resolved in any interest rate environment.
The market views Circle as an infrastructure to price it. The income statement shows that it is a rate trading tool carrying expensive allocation costs. Both viewpoints can exist simultaneously. They just have different pricing logics, and now the market is paying for both 'best versions' at the same time.
Why this is not just a macro trade
The supply of USDC recently reached a historic high of $79 billion, while the broader crypto market has sharply dropped 44% since October. This closure is worth pondering. When markets decline, speculative assets usually drop. The growth of USDC indicates that people are using it to transfer funds, rather than simply as a speculative bet.
During the Iranian conflict, the demand for USDC in the Middle East surged precisely because traditional banking became unreliable. When normal channels are obstructed, people use it for cross-border and cross-border transfers. This is how payment infrastructure performs under stress: its usage frequency increases rather than decreases.
Trading data confirms this. In February alone, USDC processed about $1.26 trillion in adjusted trading volume, while USDT corresponded to $514 billion. Tether (USDT) has a market capitalization of $184 billion, while USDC stands at $79 billion. In terms of total supply, the two cannot be compared. However, the current amount of capital for USDC has already surpassed USDT.
According to @visaonchainanalytics, 'sleeping supply' and 'active settlement' are different concepts. The former shows where people are parking their dollars, while the latter shows which dollars will be used when value needs to be transferred.
Druckenmiller said some relevant arguments this week. In an interview with Morgan Stanley recorded on January 30 and released on Thursday, he predicted that the global payment system would operate on stablecoins for 10 to 15 days throughout the year, calling cryptocurrency 'a solution seeking problems.'
The most trusted macro investor in the world divides this field in two: stablecoins are the initial foundation, and everything else is looking for a reason for the existence of facilities. This framework provides backing for bullish sentiment.
Infrastructure deposits
Tokenized assets have grown from about $1.5 billion at the beginning of 2023 to around $26.5 billion today. Many such products (including BlackRock's tokenized treasury fund BUIDL, which holds over $2 billion in assets) rely on USDC for subscription, redemption, and settlement processing.
The prediction market processed over $22 billion in trading volume in 2025, mostly settled through USDC (just Polymarket alone). Visa currently supports over 130 stablecoin-linked cards in 50 countries worldwide, with an annual settlement volume of about $4.6 billion.
Circle is building the infrastructure beneath all of this. The Circle Payments Network connects 55 financial institutions, processing an annual volume of $5.7 billion, allowing banks and payment service providers to convert USDC across borders and directly into local currencies.
Arc is Circle's own Layer-1 blockchain, designed to fully support institutional systems. This system does not rely on Ethereum or Solana's settlement infrastructure. While Ethereum and Solana currently have minimal impact on revenue, both are future-oriented strategic layouts if interest rates decline.
The scale of AI systems is small, but structurally interesting. Data released by Circle's global spending head in March showed that in the past 9 months, AI entities completed 140 million payments totaling $43 million. Of these, 98.6% were settled using USDC, with an average transaction of $0.31. There are currently over 400,000 AI entities with purchasing power. Although the dollar amount is still small, the trend is undeniable.
If AI entities need computing power, data access, and API calls while making high-frequency, sub-unit payments to each other, they need tools that can settle instantly and send with almost no cost. Circle has just launched Nano payment specifically for this need: supporting gas-free USDC payments as low as $0.000001, on-chain resources, and batch settlements. The testnet already supports 12 chains including Arbitrum, Base, and Ethereum's built-in chains.
This is what the market is willing to pay a stock price of $123 for Circle: a company focused on tokenized finance, AI entity business, cross-border payments, and prediction market centers, with regulatory strength from the (GENIUS Act) and (CLARITY Act), which is highly likely to pass before summer. Bernstein gave a target price of $190, Clear Street $136. Wall Street's most favored global target price could be as high as $280.
Inescapable contradictions
Here, I want to candidly discuss a point that bullish investors often overlook.
Circle's profitability relies on maintaining high interest rates. This is not a permanent condition. The Federal Reserve will eventually lower interest rates at some point. When that happens, the yields on treasury reserves supporting USDC will contract, and Circle's interest income will also shrink.
Circle realized this. It has been expanding its trading fees, enterprise services, payment networks, and Arc—businesses that do not rely on interest rate environments to operate. However, currently, these revenue scales are still small. Extracting capital gains remains everything.
Thus, you will find that these two logics coexist within the same stock price, but they are not the same bet.
The foundational argument posits that USDC is becoming the true payment. The pipeline is regulated, transparent, and eager to be deeply embedded in traditional finance, regardless of interest rates, this embedding has stickiness. The argument is supported by data: transaction volume digitalization, integration, Druckenmiller's framework, and Macquarie referring to stablecoins as the foundational layer of global financial infrastructure.
If this argument is correct, then Circle appears cheap in any interest rate environment, as its potential market is the entire global payment system.
Interest rate trading theory posits that Circle is a leveraged bet on 'higher and longer interest rates,' and the stock price has already reflected a situation where the Federal Reserve is never expected to lower rates again. If this is the main driver of the price, then every point of future rate cuts by the Fed is resistance, and the stock price has already overdrawn the fundamentals under normalized rates.
Both viewpoints have been priced in. The war has made it difficult for people to distinguish which one the market is buying.
This may be the most useful point in understanding CRCL (Circle's stock code) currently. The focus is not on whether it will rise to $190, but on the fact that you are buying 'infrastructure,' a 'government bond that learned to tell a good story and became a reseller.' The initial phase is a long position; then it collapses in an instant when Powell changes his mind.
Currently, the value that keeps both sides alive in the struggle is significant. The dollar is achieving the most daunting necessary task. And in the gap between the two situations lies the true hidden aspect of this company—it has figured out how to create dollar-denominated internet currency, but now it understands that at the moment when the dollar no longer generates a 5% return, it has survived.
