When USDC Meets Rate Cuts: The $60B Reserve’s Profit Dilemma—Is CRCL’s Party Over?
Stablecoin giant Circle stole the spotlight earlier this summer. On June 5, Circle’s stock (ticker: CRCL) hit the public market with a bang, opening at $69. Early investors who got in on its already-expanded IPO doubled their money overnight. All through June, CRCL kept soaring; when it neared $300, it had firmly claimed the title of “top-performing crypto stock.”
But the party didn’t last. As summer deepened, CRCL couldn’t escape the seasonal slump. Even though the stock popped 7% after Powell’s rate-cut hints last Friday, it’s been sliding most of the past month—down nearly 60% from its all-time high.
Today, let’s break down the “rate-cut dilemma” facing stablecoins, and how this monetary policy shift could shape CRCL’s future.
Interest: Circle’s “Lifeblood”
Circle’s business model is simple—like a bank, it makes money from interest.
Over $60 billion in bank deposits, overnight repurchase agreements, and short-term U.S. Treasuries back USDC. In Q2 2025, Circle raked in $634 million in interest income from these reserves.
Here’s the catch: when rates rise, every $1 in USDC reserves earns more interest; when rates fall, earnings shrink. While rates are market-driven, the Fed’s policies—especially for the short-term tools Circle uses to manage reserves—heavily influence dollar costs.
Last Friday, Fed Chair Jerome Powell dropped a big hint at Jackson Hole: rate cuts are likely. We’ve seen “false alarms” before, but this is the first time Powell himself has signaled a clear shift. He blamed lingering inflation on “one-off tariff spikes,” noted a cooling labor market, and defended potential cuts. Markets now bet the Fed could announce a cut at its September 17 meeting.
Post-Powell, odds of a cut spiked (per CME FedWatch and Polymarket). The pivot started August 1, when July’s jobs report showed just 73k new jobs (with prior months revised down sharply). Now, a 25-basis-point (0.25%) cut looks most probable.
For Circle, this is a big deal. The company’s own math: a 100-basis-point (1%) rate drop would slice $618 million off annual interest income. A 25-basis-point cut? That’s $155 million gone.
The silver lining: half that loss gets offset. Circle’s deal with Coinbase means it splits ~50% of reserve interest income with the exchange. Even so, a prolonged rate-cut cycle would squeeze Circle hard.
The Books: “Losses” Mask Fragility
You might have heard: Circle reported a $482 million Q2 net loss, way worse than analysts expected. But $424 million of that was a one-time accounting charge from employee stock compensation during its IPO.
Strip that out, and Circle is barely breaking even—exposing just how fragile it is. At current USDC supply levels, it can’t handle big rate drops.
The Fix: Grow USDC, Grow Profits?
Lower rates mean less interest per reserve dollar, hurting profits. But CRCL holders might catch a break—if one variable changes: USDC circulation.
Powell and experts argue current rates are “restrictive”; trimming Fed policy rates could boost the economy (high employment, cheaper credit) and crypto markets. If that happens, demand for crypto-native stablecoins like USDC might surge—especially if they offer DeFi yields above market rates.
To offset a 100-basis-point cut (the minimum in Circle’s sensitivity analysis), USDC supply needs to jump ~25%—injecting $15.3 billion into crypto.
Circle trades at 192x 2024 net income, pricing in high growth. But if the Fed cuts, Circle needs that growth to survive. A 25-basis-point cut? It’d need $3.8 billion more in USDC supply to keep profits steady.
As Circle puts it: “Any relationship between rates and USDC circulation is complex, highly uncertain, and unproven.” While rate impacts on reserve yields are predictable, user behavior (and thus USDC supply) isn’t.
At the end of the day, Circle’s revenue is tied to reserve interest—rate swings could shake its profits. To thrive in a rate-cut world, it needs USDC to boom… or crypto markets to come to the rescue.
Read More《当USDC遇上降息周期:600亿美元储备背后的收益困局》
This content is AI-generated and does not constitute investment advice. Please exercise your own rational judgment.
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