Circle plummets 17%: Stablecoin competition intensifies and USDC business model repricing

July 1, 2026 (Beijing time), Circle Internet Group (NYSE: CRCL), a leading U.S. crypto concept stock, experienced an extremely unusual trading day. CRCL closed down sharply 17.55% on Tuesday, ending at $62.63, already in the historical low range. A single-day drop of 17.55% is extremely rare among blue-chip U.S. stocks, but for understanding Circle as a company, short-term price fluctuations actually provide a window to examine its underlying business logic.

Stablecoin Infrastructure: The Essence of Circle's Business Model

Circle is not a "crypto company." This judgment is the starting point for understanding all valuation logic for CRCL. Circle Internet Group Inc. is the issuer of the world's second-largest stablecoin, USDC. Its core business includes USDC stablecoin issuance, reserve asset income (mainly from U.S. Treasury interest), Web3 payment infrastructure, and stablecoin settlement networks. Essentially, Circle is a "digital dollar distribution network"—it converts traditional dollars into digital dollars that can circulate freely on the blockchain by issuing USDC pegged 1:1 to the U.S. dollar, while investing user-deposited dollar reserves in short-term U.S. Treasuries to earn spread income.

As of July 1, 2026, the global stablecoin market cap has reached approximately $307.6 billion. Among them, Tether's USDT tops the list with a market cap of about $184.7 billion, while Circle's USDC ranks second with a market cap of about $73.45 billion. In terms of circulating supply, USDC currently has a circulating supply of approximately 74.68 billion tokens, corresponding to a market cap of about $74.67 billion. This scale means Circle manages over $70 billion in reserve assets—the vast majority of which are allocated to short-term U.S. Treasuries.

Understanding Circle's business model requires returning to a core formula: Circle’s revenue = USDC circulation size × net interest spread (U.S. Treasury yield – operating costs). This formula reveals the two most core drivers of CRCL’s valuation: USDC circulation size and the Federal Reserve's interest rate level.

In the first quarter of 2026, USDC's average circulation grew 39% year-over-year, but Circle’s reserve income grew only 17% year-over-year to $653 million. The revenue growth rate lagged far behind the circulation growth rate, primarily due to the average reserve yield falling from 4.16% in Q1 2025 to 3.50% in Q1 2026, a decline of 66 basis points. This is a direct manifestation of the interest rate-driven logic—the Fed’s interest rate level directly determines Circle’s "gross margin."

CRCL’s Core Drivers and the Current Macro Environment

From the current macro environment, the Federal Reserve kept the federal funds rate target range at 3.5%-3.75% unchanged in four rate meetings during the first half of 2026. However, according to the latest CME FedWatch data on July 1, market pricing shows a 66.3% probability that the Fed will hold rates steady in July and a 33.7% probability of a cumulative 25-basis-point hike. By September, the probability of a cumulative 25-basis-point hike rises further to 50%. Fed Chair Walsh has clearly prioritized price stability as the primary goal, and the updated dot plot raised the median 2026 year-end rate forecast from 3.4% to 3.8%. This means Circle’s "interest rate dividend" may face two-way pressure in the coming quarters—raising rates could expand the net interest spread but would also suppress crypto market risk appetite and USDC adoption growth.

Beyond the interest rate variable, USDC circulation growth directly depends on crypto market trading activity and payment scenario expansion. In Q1 2026, USDC on-chain settlement volume alone reached $21 trillion, with significant year-over-year growth, but this pace slowed in Q2 as the overall crypto market cooled. As of July 1, the total crypto market cap remained around $2 trillion, with the Fear and Greed Index dropping to a range of 11-16, indicating "extreme fear" and hitting an 8-month low. Bitcoin has fallen 33% year-to-date, while Ethereum is down 47%. Bitcoin ETF outflows in June reached $4.3 billion, a record high. In this market environment, stablecoins, as the "dollar liquidity channel for crypto markets," inevitably suffer from subdued overall market sentiment in terms of circulation size and trading activity.

Two Major Catalysts Converge: The Direct Triggers for CRCL’s 17.55% Crash

On July 1, CRCL plunged 17.55% to a historic low of $62.63. On the news front, two major events coincided.

News One: New stablecoin project Open Standard makes a high-profile entry. Open Standard announced support from over 140 enterprises, including payment giants, traditional banks, asset managers, and tech platforms such as Visa, Mastercard, American Express, Stripe, BlackRock, Coinbase, Google, BNY Mellon, Standard Chartered, DBS, U.S. Bank, Shopify, DoorDash, and IBM. The consortium plans to launch a stablecoin called Open USD, expected to go live later in 2026, deployed on multiple chains including Base (Coinbase’s Layer 2 network), Solana, Stellar, Polygon, and Ripple. This news directly triggered market concerns about USDC’s market share erosion—the joint endorsement of over 140 cross-industry giants signals that the stablecoin track is evolving from a "duopoly" to a "multi-polar competition" landscape.

News Two: Russell Indexes formally remove CRCL. The Russell indexes completed their annual rebalancing after the close on June 26, and CRCL was removed from five major Russell growth indexes, including the Russell 1000 Growth. Passive funds and ETFs tracking these growth indexes will undergo mechanical adjustments, leading to large-scale selling of CRCL shares. This passive selling pressure continued to escalate on July 1, becoming another major force weighing on the stock price. Prior to this, CRCL’s stock price had already fallen 32.8% over 30 days, trading about 47% below the analyst average target price of $143.48. The crash on July 1 can be understood as a combination of passive selling pressure and fundamental competitive concerns.

MiCA Fully Takes Effect: USDC’s Structural Opportunity in Europe

From a broader industry perspective, July 1, 2026, is also a day with high information density on the crypto regulatory calendar. The EU’s Markets in Crypto-Assets Regulation (MiCA) came into full effect on that day. Under the rules, stablecoin issuers that have not obtained a license before July 1, 2026, will be forced to exit the EU market. Circle’s French subsidiary had previously received approval from the French Financial Markets Authority (AMF), officially obtaining the Crypto Asset Service Provider qualification under the MiCA framework, allowing it to offer USDC and EURC (euro stablecoin) custody and transfer services across the entire European Economic Area. This makes USDC one of the few stablecoins that can operate compliantly in the EU after MiCA takes effect. Meanwhile, USDT (Ethereum ERC-20 version) has largely withdrawn from the European market. This change in the regulatory landscape actually provides a structural tailwind for USDC’s expansion in Europe, creating a delicate balance with the aforementioned two bearish news items.

Circle’s Moat and Long-Term Growth Logic

Circle’s moat is not only reflected in compliance. In terms of reserve transparency, Circle publishes a full reserve audit report monthly, with funds custodied at top banks like JPMorgan and BNY Mellon. Reserves consist only of cash and short-term U.S. Treasuries, with no high-risk assets such as cryptocurrencies or secured loans. During the 2023 Silicon Valley Bank collapse, USDC briefly de-pegged, but Circle quickly filled the gap and further strengthened its reserve management processes. In 2026, Circle’s bank charter application received conditional approval. A stricter U.S. regulatory environment is making it harder for competitors with opaque reserve assets to compete with Circle in compliant markets.

On the payment infrastructure front, Circle is evolving from a "stablecoin issuer" to a "Web3 financial infrastructure." In its 2026 product roadmap, Circle explicitly proposed advancing enterprise-level blockchain infrastructure centered around the Arc public chain, focusing on developing the Circle Payment Network (CPN) and StableFX foreign exchange trading platform to lower the barriers for institutions to use stablecoins for payments, settlements, and forex trading. The CPN connects a global network of financial institutions, enabling 24/7 real-time stablecoin cross-border payments. As of January 27, 2026, Circle’s tokenized money market fund USYC had $1.6 billion in assets under management. These initiatives aim to upgrade USDC from a simple payment tool to a complete financial settlement layer.

Valuation Divergence and Triple Market Concerns

From a valuation perspective, analyst expectations for CRCL are significantly divided. According to a FactSet survey of 20 analysts, the median 2026 EPS forecast for CRCL is $0.80, with a median target price of $135. On June 5, 2026, Mizuho maintained a "neutral" rating on CRCL but slashed its target price from $135 to $85. Market revenue expectations for Circle for the year are around $3.07 billion, up about 11% year-over-year. Based on the closing price of $62.63, CRCL’s P/E ratio has been compressed to a very low level—but this low valuation also reflects the market’s triple concerns about slowing USDC circulation growth, declining interest rates, and intensifying competition.

Meanwhile, the overall crypto market remains in a deep correction. On July 1, Bitcoin fell below $59,000, hitting a new low for the year, briefly testing the 200-week moving average near $58,000. Bitcoin spot price is around $59,500, down 2.78% in 24 hours; Ethereum is around $1,575, down 2.94% in 24 hours. Sentiment in the entire crypto market is extremely pessimistic, but stablecoins, as the underlying infrastructure, have not changed their long-term adoption trend due to short-term price fluctuations.

Conclusion

Circle’s business model essentially monetizes the trend of digitalizing the U.S. dollar. It is not a company that profits from crypto asset price volatility, but rather a "financial infrastructure" that earns stable returns by managing dollar reserve assets—which is why it is called one of the most authentic "cash flow businesses" in Web3.

However, the investment logic for CRCL is not the same as "holding USDC." USDC holders obtain a 1:1 store of value and transfer function, while CRCL shareholders capture the spread income Circle earns from USDC reserves—the transmission chain between the two is highly dependent on four variables: the Fed’s interest rate, USDC circulation size, compliance progress, and competitive landscape.

On July 1, CRCL plunged 17.55% to $62.63. On the surface, this was a combination of passive selling from Russell index removal and competitive concerns over Open USD. But the deeper reason is that the market is reassessing Circle’s earnings sustainability in an environment of declining interest rates and intensifying competition. MiCA’s effectiveness opens a compliance channel for USDC in Europe, but the entry of Open USD also signals that the stablecoin track is shifting from a "duopoly" to a "multi-polar competition." For understanding Circle’s long-term value, the focus should not be on short-term stock price movements, but on whether USDC’s circulation size can continue to grow, how the Fed’s interest rate path will evolve, and whether Circle can build a sufficiently deep moat in payment infrastructure.

Stablecoins are reshaping the global payment system—this trend will not change because of CRCL’s single-day plunge. However, whether Circle can continue to capture value in this trend depends on whether it can evolve from a "digital dollar distribution network" to the "operating system of Web3 finance."

FAQ

Q1: What is the relationship between CRCL and USDC?

CRCL is the stock ticker for Circle Internet Group, and Circle is the issuer of the USDC stablecoin. USDC is Circle’s core product. Circle earns spread income by issuing USDC and managing its dollar reserve assets (mainly short-term U.S. Treasuries). Holding CRCL stock is equivalent to investing in the value-capturing ability of the USDC ecosystem.

Q2: What is Circle’s source of profit?

Circle’s core profit source is the interest income from USDC reserve assets. Users deposit dollars with Circle in exchange for USDC, and Circle invests these dollars in highly liquid assets such as short-term U.S. Treasuries to earn interest. In Q1 2026, Circle’s reserve income was $653 million.

Q3: Why did CRCL’s stock price crash on July 1, 2026?

Two major news items overlapped: First, the Russell indexes removed CRCL from five growth indexes, triggering passive fund selling. Second, the new stablecoin project Open USD received support from over 140 enterprises, including giants like Visa, Mastercard, BlackRock, Coinbase, and Google, sparking market concerns about USDC’s market share. That day, CRCL closed down 17.55% at $62.63.

Q4: What impact does the MiCA regulation have on Circle?

MiCA came into full effect on July 1, 2026. Stablecoin issuers without a license will be forced to exit the EU market. Circle has already received MiCA authorization from the French Financial Markets Authority (AMF) in advance, allowing it to operate USDC and EURC compliantly across the entire European Economic Area. This gives USDC a structural first-mover advantage in the EU market.

Q5: What is Circle’s long-term growth logic?

Circle’s growth logic is built on three pillars: continuous expansion of USDC circulation size (up 39% year-over-year in Q1 2026), deepening of payment infrastructure (CPN, StableFX, Arc public chain), and first-mover compliance advantages (MiCA authorization, U.S. bank charter). In the long term, Circle aims to evolve from a stablecoin issuer to the operating system layer of Web3 finance.