Bitwise: The latest draft of the "Clear Act" causes Circle to drop 20%

Author: Matt Hougan, Chief Investment Officer of Bitwise; Compiled by: Golden Finance

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

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

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

But among all options, one opportunity stands out: Circle—the issuer of the world’s second-largest stablecoin, USDC. It is the only publicly listed pure stablecoin company. To me, it’s the most obvious choice.

So, is this a good investment?

Answering this question now is timely, as Circle’s stock price recently plunged significantly (a 20% drop on March 24): the latest draft of the CLARITY Act restricts platforms’ ability to pay interest income to stablecoin users. However, I believe 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 Decide Circle’s Future

1. How big will the stablecoin market become?

The first question is: what will be the size of the stablecoin market? There are various forecasts, but the most widely cited comes from Citigroup. The “base case” predicts that by 2030, assets under management (AUM) in stablecoins will reach $1.9 trillion; an “optimistic scenario” estimates $4 trillion.

The news related to the CLARITY Act has not changed this baseline forecast. So far, interest income has not been a major driver of stablecoin growth. Currently, most stablecoins do not generate interest. The rapid popularity of stablecoins is primarily because they enable efficient, reliable transfer of funds worldwide—for trade settlement, as collateral for loans, as a substitute for volatile fiat currencies, and in many other scenarios.

Convenience is the core advantage of money, and this is where stablecoins excel. Currently, the average annual interest rate on US savings accounts is about 0.60%, with checking accounts at just 0.07%. People deposit money into these accounts not for interest but for safety and accessibility. If the global financial system increasingly migrates onto blockchain rails, I expect stablecoins to play an ever more important role in this transition, regardless of whether they pay interest.

My intuition tells me that Citigroup’s baseline scenario is quite conservative. But to keep the analysis rigorous, we’ll use their $1.9 trillion forecast as our starting point.

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

Currently, Circle’s USDC accounts for about 25% of the stablecoin market, second only to Tether’s USDT.

(Why not invest in Tether? You can’t—because it’s a private company.)

Distribution of Stablecoin Market Capitalization

Source: Bitwise Asset Management, data from The Block. Time frame: Jan 1, 2020 – Mar 23, 2026.

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

A common view is that as large firms like Bank of America, Stripe, and Wells Fargo enter the stablecoin space, Circle’s market share will decline.

I am skeptical. Historically, innovators tend to maintain strong early market positions.

For example:

• In 1976, an obscure company called 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 US ETF—SPY—when it was not yet a giant in asset management. Today, it remains the most traded ETF worldwide, managing over $650 billion.

• In 1996, an unknown asset manager, Barclays Global Investors (BGI), launched a series of international ETFs. BGI was eventually acquired by BlackRock for $12 billion, and this small business grew into iShares, now managing $5 trillion.

We are even seeing early signs that Circle can withstand competition from well-known firms. In 2023, PayPal, one of the largest digital payment companies, launched its stablecoin PYUSD. However, the response was lukewarm, and PYUSD now accounts for just over 1% of the market.

Of course, there are examples where giants have crushed early movers in other sectors. For instance, in money market funds, later entrants like Fidelity, Vanguard, and Federated Hermes captured most of the market from early pioneers like Reserve Fund. This is noteworthy because money market funds and stablecoins are similar—they both hold USD funds invested in high-quality short-term securities like US Treasuries.

Nevertheless, I remain skeptical that big banks will completely wipe out Circle. Its market share could even grow. Although Circle currently holds about 25% of the overall stablecoin market, its share in the regulated stablecoin market is much larger (Tether dominates offshore markets). While exact figures are hard to obtain, I estimate that over 80% of stablecoin assets under management are in regulated markets. If most growth in stablecoin AUM occurs in these regulated onshore markets—driven by banks, fintechs, and large corporations choosing onshore, regulated stablecoins—Circle’s market share could far exceed 25%.

For this analysis, however, I’ll adopt a conservative approach. Let’s assume Circle maintains a 25% market share in the future.

3. What will be the profit margin?

The final and most critical question: how much revenue will Circle generate from deposits?

Currently, Circle earns interest income from US Treasuries backing USDC. At current rates, this yields about 4% on its $80 billion in AUM.

But this figure likely overstates Circle’s actual revenue potential. You must consider the distribution costs Circle pays to attract assets. For example, USDC was co-developed with Coinbase and is its flagship stablecoin. As part of the partnership, Circle pays Coinbase all interest income generated on USDC held on Coinbase’s platform, passing most of it to users. Circle also has distribution agreements with other exchanges. Here, Circle bets that by paying some of these distribution costs, it can create a marketing flywheel that attracts more assets—leading to higher income or future monetization.

Overall, about 60% of Circle’s current revenue goes to distribution partners. This means its effective “take rate” is roughly 1.6% under current interest rates.

Is this sustainable? Two key factors matter:

First, interest rates. Circle’s interest income is directly tied to prevailing rates. Fed rate hikes benefit Circle; rate cuts hurt.

Second, competition. Imagine a world with hundreds of stablecoins—USDC, WFUSD, BAUSD, PYUSD, and others—where consumers frequently switch between products. Circle’s ability to retain interest income would be limited. In theory, competition would compress margins—basic economics.

But I am skeptical. Markets that should be perfectly efficient often aren’t. Charles Schwab, for example, earns billions annually from the spread between interest paid to depositors and the yield on invested funds—despite customers easily switching to higher-yield options with a click. Customers don’t always do so because their core value isn’t interest but convenience, trust, and integration. In many ways, USDC is similar: people hold it because it’s usable everywhere and trustworthy, not because of interest rates. This stickiness won’t vanish overnight.

Additionally, I believe the current draft of the CLARITY Act could actually improve Circle’s profit margins by making it harder for stablecoin holders to earn interest elsewhere.

Overall, I expect that increased competition will put downward pressure on Circle’s margins. The company is actively working to change how it earns revenue from users. For this analysis, I’ll assume the take rate halves to 0.8%.

Conclusion

Addressing these three questions doesn’t cover all aspects of Circle’s business. As I hinted earlier, it has launched its own blockchain, is innovating in payments, and its non-interest income is growing rapidly. But I believe these three questions are the 80/20 rule for analyzing the stock.

Based on my simplified estimates—$1.9 trillion market size, 25% market share, and 0.8% profit margin—after deducting distribution costs, by 2030, Circle could generate about $3.8 billion in revenue, excluding other expenses. Currently, the company’s operating costs are relatively low (about $144 million in 2025), meaning even if these costs double or triple by 2030, roughly $2.7 billion after taxes could remain as net profit. Using the S&P 500’s current average P/E ratio of 28, Circle’s valuation could reach $75 billion.

That’s an interesting figure—about twice its current market cap. It’s quite good—yet you might ask, given its volatility, is it worth it?

I want to point out that I’ve taken conservative assumptions at every step. If stablecoin growth reaches Citigroup’s optimistic scenario, or Circle’s market share expands further (as it recently has), or the company maintains current margins or finds new revenue streams, its value could be much higher.

Ultimately, I can imagine Circle’s value being well above my rough 2030 target, or below it. What I like about this analysis is that it shows the current valuation is reasonable. If stablecoins develop as expected—keeping most assumptions conservative—you’ll find Circle quite attractive.