Key Takeaways
- U.S. rate cuts could shave $618 million off Circle’s annual revenue.
- Circle’s earnings rely heavily on interest from U.S. Treasury bonds backing USDC.
- Markets see a strong chance of the Fed cutting rates by 50–100 bps in September.
With odds of a September Federal Reserve rate cut now topping 90% — fueled by President Donald Trump’s calls for up to 150 basis points in reductions — the pressure is mounting on stablecoin issuer Circle.
If the Fed delivers even a 100 bps cut next month, the move could slash Circle’s annualized gross revenue by $618 million, its gross profit by $303 million, and squeeze margins by over three percentage points, according to Dragonfly investor Omar.
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The $618 Million Threat to Circle’s Business
Circle, the company behind the USDC stablecoin, generates the bulk of its profits from interest on U.S. Treasury holdings that back its $64 billion in circulating USDC.
In 2024, interest income made up 99% of the firm’s $1.68 billion in revenue.
Those reserves — mainly short-term Treasuries — are highly sensitive to changes in interest rates. A rate cut erodes the yield Circle earns on these assets, directly hitting the bottom line.
Omar’s analysis suggests Circle would need to expand the USDC supply by $28 billion — roughly 44% more than today — just to offset the hit from a 100 bps cut.
Circle’s Push for Diversification
Circle has been moving aggressively to broaden its revenue streams.
A recent $1.5 billion raise and new product launches — such as transaction flow monetization tools like Circle Payment Network (CPN) and the upcoming Circle Chain — show the company is trying to reduce dependence on interest income.
Still, sentiment is mixed. Supporters tout USDC’s dominance in DeFi and institutional adoption, while skeptics worry about shrinking yields and intensifying competition from rivals like Tether.
What Rate Cuts Could Mean for Crypto
While rate cuts would hurt Circle’s earnings, they could be bullish for the broader crypto market.
Cheaper borrowing costs often spur capital inflows into risk assets, potentially lifting both Bitcoin and altcoins.
Trump has been pushing for cuts since May, but Fed Chair Jerome Powell has so far resisted — even under political pressure.
The Polymarket prediction platform now gives more than an 80% chance of a September cut.
That said, Powell’s history suggests caution. He held rates steady during past market turbulence, and with stocks and crypto already near local highs, he may see little urgency to cut.
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