Bitwise: The latest draft of the "Clarity Act" causes Circle to plummet 20%. Future market valuation of Circle under review.

Author: Matt Hougan, Chief Investment Officer at Bitwise; Translated by: Golden Finance

Based on conservative assumptions, even considering the recent concerns raised by the CLARITY Act, I expect Circle’s value to reach $75 billion by 2030.

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

Typically, we recommend that people consider crypto assets that support the stablecoin ecosystem, such as Ethereum, Solana, and Chainlink, and/or crypto companies that are positioned in this space, like Circle and Coinbase. Since it is difficult to predict who will benefit the most from the rise of stablecoins, a reasonable strategy is to invest across the entire sector.

However, among all the options, one opportunity stands out: Circle—the issuer of USDC, the second-largest stablecoin in the world. It is the only publicly traded company focused solely on stablecoins. For me, it is the most obvious choice.

So, is this a good investment?

Now is a timely moment to answer this question, as Circle’s stock has dropped significantly due to a news report (on March 24, Circle fell 20%): the latest draft of the CLARITY Act restricts the ability of platforms to pay interest income to stablecoin users. However, I believe that this reaction is somewhat exaggerated.

To explain why, we need to look at Circle’s future from a macro perspective.

Three Core Questions That Will Determine Circle’s Future

1. How large will the stablecoin market be?

The first question is how large the stablecoin market will grow. There are various predictions from the market, but the most widely cited comes from Citigroup. The report’s “baseline scenario” predicts that by 2030, assets under management (AUM) in stablecoins will reach $1.9 trillion; under the “optimistic scenario,” it could reach $4 trillion.

The news about the CLARITY Act has not changed this baseline prediction. So far, interest income has not been the primary driver of stablecoin growth. Currently, the vast majority of stablecoin holdings do not generate interest. The rapid rise of stablecoins is due to their ability to efficiently and reliably transfer funds globally—for trade settlements, as collateral for loans, as a substitute for unstable fiat currencies, and in many other scenarios.

Convenience is the core advantage of currency, and this is precisely what stablecoins excel at. Currently, the average annualized interest rate for a regular savings account in the U.S. is about 0.60%, while the rate for checking accounts is only 0.07%. People do not put money into these accounts for the interest. If the global financial system is increasingly moving toward a blockchain framework, then regardless of whether stablecoins provide interest, I expect them to play an increasingly important role in this transition.

My intuition tells me that Citigroup’s baseline scenario is actually quite conservative. However, to maintain the rigor of the analysis, we will use its $1.9 trillion forecast as our estimating basis.

2. What market share will Circle’s USDC capture?

Currently, Circle’s USDC holds a 25% share of the stablecoin market, second only to Tether’s USDT.

(Why not invest in Tether? You can’t. Because it is a private company.)

Stablecoin Market Capitalization Distribution

Source: Bitwise Asset Management, data from The Block. Time range: January 1, 2020, to March 23, 2026.

Note: “Others” include BUSD, CRVUSD, DAI, FDUSD, FEI, FRAX, GHO, GUSD, LUSD, MIM, PYUSD, TUSD, USDD, USDE, USDP, and USDS.

A common viewpoint is that Circle’s market share will gradually shrink as large corporations like Bank of America, Stripe, and Wells Fargo enter the stablecoin space.

I am skeptical of this. Historically, innovators often manage to maintain their early market leadership.

For example:

• In 1976, a little-known company, Vanguard, launched the world’s first index fund. Today, Vanguard manages more passive assets than any other institution globally.

• In 1993, State Street launched the first U.S. exchange-traded fund (ETF)—SPY—when it was not a powerhouse in the asset management industry. Today, it remains the most actively traded ETF globally, managing over $650 billion in assets.

• In 1996, a little-known asset management company, Barclays Global Investors (BGI), launched the first series of international ETFs. BGI was eventually acquired by BlackRock for $12 billion, and that small business evolved into iShares, which now manages $5 trillion in assets.

We have even seen early signs that Circle can handle competition from well-known companies in the stablecoin space. In 2023, one of the largest digital payment companies, PayPal, launched its stablecoin, PYUSD, with much fanfare. However, the launch ultimately received a lukewarm response, and today, PYUSD captures just over 1% of the market.

Of course, in other areas, there are examples of giants coming in and crushing early pioneers. In the money market fund space, later entrants (like Fidelity, Vanguard, and Federated Hermes) took most of the market from the initial innovator, the Reserve Fund Group. This is worth noting, especially considering the similarities between money market funds and stablecoins: both attract dollar funds and invest them in high-quality short-term securities like U.S. Treasuries.

That said, I still doubt that large banks will completely crush Circle. Circle’s market share could also expand. After all, while Circle only holds a “mere” 25% of the entire stablecoin market, its share in the regulated stablecoin market is much larger. (Tether’s USDT dominates the offshore market.) While it’s difficult to obtain exact data on Circle’s market share in regulated markets, I estimate that this ratio exceeds 80%. If you believe that most of the growth in stablecoin assets under management will come from these markets (as banks, fintech companies, and large enterprises choose onshore, regulated stablecoins), then Circle’s market share could far exceed the current 25%.

However, for the purposes of this analysis, we will adopt a conservative approach. Let’s balance these two forces and assume that Circle will maintain a 25% market share in the future.

3. What will the profit margin be?

The last question is undoubtedly the most challenging and critical: How much revenue will Circle generate from deposits?

Currently, Circle earns interest income from all U.S. Treasuries backing USDC. At current interest rates, this means it has a yield of about 4% on $80 billion in assets under management.

However, this figure exaggerates Circle’s actual revenue potential. You must consider the distribution fees Circle pays to attract managed assets. For example, USDC was co-developed with Coinbase and is the flagship stablecoin of the exchange. As part of the partnership agreement, Circle pays all interest income generated by USDC on the Coinbase platform to Coinbase, which in turn passes most of it on to users. Circle has also established distribution agreements with other exchanges. Here, Circle bets that by paying a portion of distribution fees, it can kickstart a marketing flywheel to directly attract assets—at which point it can generate more revenue or monetize those assets in other ways in the future.

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

Is this ratio sustainable? There are two key factors to consider.

The first is interest rates. Circle’s interest income is directly linked to prevailing rates. Interest rate hikes by the Federal Reserve are beneficial for Circle, while rate cuts are detrimental.

The second is competition. Imagine a world with hundreds of stablecoins, where consumers frequently switch between USDC, WFUSD, BAUSD, PYUSD, and other products; Circle’s ability to retain interest income will be limited. In theory, competition will compress profit margins. This is a basic principle of economics 101.

However, I am skeptical about this. Markets that “should” be completely efficient often are not. Charles Schwab generates billions of dollars each year from the spread between the interest rates paid to depositors and the returns earned on invested funds—despite customers being just a click away from higher-yield products. But customers do not always do this, as their core value proposition is not interest, but convenience, trust, and integration. In many ways, USDC is similar: people hold it because it is usable and trustworthy everywhere, not because of the interest rate. This stickiness will not disappear overnight.

I would also like to add that the current draft of the CLARITY Act may actually benefit Circle’s profit margins by making it more difficult for stablecoin holders to earn interest income.

That said, overall, I believe that as competition increases, Circle’s profit margins will face greater pressure in the future. It may even have to change the way it generates income from users, a direction the company is actively working on. For the purposes of this analysis, we assume that the take rate is halved to 0.8%.

Conclusion

Answering these three questions does not cover all aspects of Circle’s business. As I hinted above, it has launched its own blockchain, continues to innovate in payment technology, and non-interest income is also growing rapidly. But I believe these three questions represent an efficient 80/20 rule for analyzing this stock.

Based on my simple estimates—$1.9 trillion market size, 25% market share, and 0.8% profit margin—after accounting for distribution fees, Circle’s revenue will reach $3.8 billion by 2030, excluding other expenses. Currently, the company’s actual operating expenses are relatively low ($144 million in 2025), meaning that even if these expenses double or triple by 2030, approximately $2.7 billion of that revenue would still be left as net profit after taxes. Applying the current average price-to-earnings ratio of the S&P 500 (28 times), Circle’s market value would reach $75 billion.

This number is interesting, as it is about double its current market value. That’s quite good—but you might ask, considering its volatility, is it worth it?

I want to point out that at every step of my analysis, I have chosen conservative assumptions. If stablecoin growth reaches Citigroup’s optimistic scenario, or if Circle’s market share expands further (as it has recently done), or if the company maintains its current take rate or finds new sources of revenue, then its value could be much higher.

Ultimately, I can envision Circle’s value being far above my rough estimate of the 2030 target, and I can also imagine its value being below that target. One aspect I like about this analysis is that it shows the current valuation is reasonable. If stablecoins develop as people expect, even maintaining conservative assumptions across the board, you will still find Circle to be quite attractive.