Interest Rates Pressuring Circle Stock?

Circle Internet Group (NYSE:CRCL) stock has experienced a challenging month, decreasing by approximately 40 percent and currently trading around $76. This is a significant adjustment, but it’s important to note that the stock was initially priced at $31 during its remarkable June IPO and is still valued at more than two-and-a-half times that amount. The decline is indicative of various pressures coming together at once. The company’s recent quarterly performance appeared robust at first glance — its third-quarter revenue surged 66% year-over-year to $740 million, and adjusted EBITDA rose from $126 million to $166 million. Nevertheless, Circle has also increased its projected operating expenses for the fiscal year, which seems to have triggered a sell-off. Additionally, broader economic factors have contributed to the ongoing pressure.

The primary macroeconomic factor is interest rates. There is a growing debate in the market regarding the trajectory of U.S. interest rate cuts. While a cut in December seems less probable, 2026 appears to be on track for reductions as inflation subsides and unemployment remains stable. Typically, most high-growth tech companies would welcome this type of outlook. However, Circle is not among them. More than 90 percent of its revenue last quarter was derived from interest accrued on the cash and Treasuries backing its stablecoins. Lower rates translate to decreased yield income, meaning a declining interest rate environment could be detrimental.

USDC Is Core of Circle’s Business

Circle’s operations remain centered around USDC, the dollar-linked stablecoin that functions on networks like Ethereum, Solana, and Tron. USDC continues to grow rapidly. Its circulation reached 73.7 billion dollars in the latest quarter, marking an increase of 108 percent compared to a year ago, and Circle anticipates long-term annual growth of about 40%. This growth is not solely a result of increased crypto trading volume. USDC is being used more frequently for cross-border remittances, B2B transactions, and international treasury operations.

There is also an improvement in regulatory clarity. The GENIUS Act, which was passed in July 2025, established the first federal framework for payment stablecoins. This represents a significant advancement: it provides banks, fintech companies, and corporations a more stable environment to integrate stablecoins into everyday operations. Nonetheless, USDC still falls short compared to its larger competitor. Tether’s USDT holds a significantly greater share of the dollar stablecoin market.

Building Payment Rails

Circle is establishing itself as more than just a USDC issuer by creating the essential infrastructure for next-generation payments. The Arc test network — which is already attracting interest from over 100 companies — serves as the blockchain layer where developers and financial entities can eventually facilitate quicker, programmable money flows, potentially supported by a native token. CPN represents the other half of the strategy: the off-chain payments network, which currently involves 29 institutions that have committed to it and many more that are assessing its viability. Arc functions as the on-chain rails, directly coordinating transactions on a blockchain, while CPN acts as the off-chain rails, enabling organizations to transfer USDC balances without the necessity of a blockchain for each transfer.

This initiative places Circle in direct competition with major payments players such as Visa (NYSE: V) and Mastercard (NYSE:MA), in addition to the crypto networks it currently relies on like Ethereum and Solana. This change is significant, as Circle not only would issue digital currency but also manage the system that enables transactions and may collect fees. The key challenge, however, lies in gaining adoption. A network is only effective if a sufficient number of participants utilize it, and various others are in the process of developing their own systems. Circle must demonstrate that Arc is valuable enough to build upon. In addition to this, there are other risks to consider.

A Risky Bet

Although the long-term strategy is ambitious, the immediate future carries significant risks. Demand for stablecoins is historically cyclical, increasing during crypto bull markets — when trading activity is high — and weakening during recessions. The volatility within the crypto market accentuates this point. Coinbase (NASDAQ:COIN), an industry benchmark, traded at over $340 in late 2021 but plummeted to about $30 by early 2023, marking a decrease of nearly 90 percent. This decline occurred even with Coinbase generating $7.4 billion in revenue and $3.6 billion in profit in 2021. Circle is not yet functioning on that scale. For the fiscal year ending March 2025, Circle reported revenue of $1.89 billion and approximately $172 million in profit. A prolonged downturn in the crypto market or a sharp drop in interest income would likely have a more substantial impact on Circle’s stock.

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