Breaking! $USDC circulation plummets by 7 billion, Circle's stock price halved—DeFi 'barometer' fails, how much time do retail investors have to escape?

Counterintuitively, $USDC, which is more compliant, actually has its main battlefield in the DeFi space. In June 2026, a seemingly bottom-fishing recovery for Circle had just begun before it came to a halt.

As of June 25 local U.S. time, $USDC's circulating supply has fallen to 73.6 billion tokens, evaporating approximately $7 billion from its peak; Circle's stock price simultaneously halved, once dropping to around $63. The $7 billion decline relative to the $80 billion peak is less than 10%. But what about the neighboring $USDT? It once reached about $191 billion, and now remains near $186.3 billion, a reduction of only $4.7 billion, or less than 3%.

Although there is no direct evidence proving a causal link between the decline in $USDC supply and the drop in Circle's stock price, the two are synchronously resonating. Combined with the coincidence of earlier security incidents in DeFi and the timing of Circle's stock price decline, it exactly corroborates the view put forward by Compass Point analyst Ed Engel in January this year: Circle is a barometer of DeFi activity.

Engel pointed out at the time that Circle trades similarly to cyclical stocks — between October 2025 and January 2026, the correlation coefficient between the $USDC supply curve and the $ETH price trend was as high as 0.66. The core reason: 75% of $USDC circulates in scenarios such as cryptocurrency exchanges and DeFi protocols, while the proportion actually used for daily consumption and cross-border payments is far lower than imagined.

Open the ranking of $USDC holding addresses on Etherscan; the first page is filled with contract holding addresses — these $USDCs exist in DeFi, exchange multi-sig wallets, cross-chain bridges, and other protocols. The top 100 $USDC holding addresses on Ethereum account for over 50% of the supply, while 0.32% of holding addresses control 93.55% of the total. A large amount of $USDC is placed in protocols to seek yields higher than bank deposits. Such concentration is by no means what a "digital dollar" used for daily circulation should exhibit.

You might counter with $USDT's even higher concentration on Ethereum, but the Web3 industry uses $USDT to pay salaries, the foreign trade industry uses $USDT for settlement, gray and black markets use $USDT to evade regulation, and third-world countries use $USDT to protect their deposits — these practical use cases are very common. Although not as "glamorous" as $USDC, these scenarios constitute $USDT's base, and have enabled this stablecoin, which should have been primarily used as a trading pair in crypto, to shrink less than the more compliant $USDC during such a market downturn. News today that $USDT is trading at an 8% premium over the normal level in India further corroborates this point.

DeFi's overall TVL began to decline from mid-April — that is, after the Kelp DAO attack — while Circle's stock price started falling from mid-May. Although the start times differed, the subsequent trends were largely similar.

Just last month, Circle and Coinbase jointly pushed $USDC into the position of the settlement stablecoin on Hyperliquid, at the cost of not only staking 500k $HYPE each but also giving up 90% of the yield from the reserve assets backing $USDC on Hyperliquid. Behind this seemingly "triple-win" situation lies Circle's helplessness: its main battlefield, DeFi, is rapidly shrinking; the Kelp DAO incident has severely damaged public trust; waiting for DeFi to naturally increase $USDC usage has hit a bottleneck, forcing Circle to "fend for itself."

If you look closely, you will find that $USDC is not only the settlement asset on Hyperliquid but also on platforms like Lighter. Beyond the cryptocurrency domain, Circle is also tirelessly promoting $USDC to be "used as dollars." According to Artemis data, $USDC's "organic transfer volume" (excluding wash trading, high-frequency trading, exchange wallet consolidation, etc.) reached $18.3 trillion in 2025, while $USDT's was $13.2 trillion. It is an indisputable fact that $USDC is widely used for institutional and compliant payment scenarios, but these scenarios do not require as much $USDC as imagined — fund flows may not always exist in the form of $USDC but use it as an "intermediate state" to reduce the time and cost of transfers between banks or financial institutions.

In other words, to increase $USDC supply by 10 billion, it might require trillions of dollars in actual fund flows in the real world, but on-chain, it could be just a few large DeFi protocols, meme coin trading platforms, or prediction markets. No matter how fast $USDC circulates in the real world or how high its usage rate is, if supply does not increase, revenue and profits will not grow either.

Of course, all this is not enough to "sentence Circle to death." If in the future Circle can break free from its dependence on DeFi, or prove that real-world usage significantly drives $USDC supply growth, then the investment thesis may be rewritten. But in the short term, we may still need to closely watch whether DeFi can break free from the shackles of "unequal risk-reward" and give the market more confidence.

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