Stability coins move towards trillions, Circle is mispriced-Bitwise analysts

The supply of stablecoins is accelerating towards a milestone that almost no one could have predicted two years ago, but one of the major issuers in the field has not aroused investor enthusiasm.

Bitwise analyst Ryan Rasmussen believes that as the total market value of stablecoins moves towards the trillion-dollar mark, the market's pricing of Circle has deviated. As the issuer of USDC stablecoins, Circle has been quietly building a payment infrastructure that goes far beyond the dollar representation on the simple chain. The company holds more than $60 billion in assets to support its stablecoin, but private equity market valuations do not fully reflect its core position in the rapidly expanding liquidity layer.

Assumptions for trillion-dollar stablecoins

The supply of stablecoins has more than doubled from its 2023 low. Tokens backed by fiat are currently circulating on most mainstream blockchains and serve as a settlement track for DeFi lending, derivatives and cross-border payments. At the current growth rate, the total market value of stablecoins is expected to exceed US$1 trillion in a few years. Circle and Tether jointly control the vast majority of this market.

The core of Rasmussen's view is that investors are too narrow-minded. They view Circle as a stablecoin issuer vulnerable to interest rate compression, rather than an infrastructure company whose profit margins remain strong as payments expand. This perspective is crucial because payment flows are more sticky than speculative cryptocurrency transactions. As Circle builds a compliant and institutional-level payment pipeline, its revenue model will shift from reserve interest income to transaction-based fees.

This is not empty talk. Circle's recent partnerships with traditional payment processors and expansion into markets outside the U.S. suggest the company is positioning itself in a world where stablecoins become the default digital dollar for retail and wholesale settlements. However, the regulatory environment remains a key variable.

The costs set by Congress on stablecoins regulation will determine how quickly banks and non-bank issuers act. The current legislative battle over the largest cryptocurrency bill in U.S. history shows that the banking community is strongly resisting a framework that could allow non-bank stablecoin issuers such as Circle to thrive with a clear legal status. Circle's first-mover advantage will be boosted if the final bill tends to relax restrictions on banks issuing stablecoins; otherwise, it will face a more fragmented path.

What is missing from the market

One reason Circle may be mispriced is that the secondary stock trading platform does not fully reflect the economic value of a company that can generate billions of dollars in annualized revenue through relatively simple products. Unregulated and opaque Tether reports profits comparable to top Wall Street firms. In contrast, Circle prioritizes transparency and regulatory compliance, which suppresses short-term profitability but builds a deeper license moat.

It is the perspective of payment infrastructure that Rasmussen emphasizes. Circle's Web3 services platform allows companies to accept stablecoin payments, manage on-chain vaults, and integrate USDC into consumer applications without having to own cryptocurrency. As tokenized real-world assets expand, this pipeline will become more valuable. The recent milestone of $20 billion in tokenization of real-world assets on the chain suggests that demand for settable digital dollars is far from reaching its peak. As tokenized treasury bonds, private credit and institutional trading vehicles move onto the chain, USDC is being positioned as the preferred settlement asset.

Investors still betting on the stablecoin hypothesis point out that competition from bank-issued digital deposits, central bank digital currencies, and Tether's dominance cannot be ignored. Tether's USDT remains the most traded stablecoin, especially in emerging markets. Circle must prove that it can gain market share not only from native cryptocurrency traders, but also from companies trading across borders. This requires improved execution, which historically disappointed some early supporters.

Circle's listing plans have been suspended and restarted many times, and the market remains cautious about the mood of cryptocurrency companies trying to list. However, the fundamental growth of stablecoins suggests that a company with a lasting income stream and a strong balance sheet will eventually receive a premium. Institutional demand for on-chain infrastructure suggests that capital is willing to price future utility even in mixed short-term narratives.

Uncertainty in Circle Premium

The most difficult thing to model is the regulatory path. Circle operates in multiple jurisdictions, each with different stablecoin rules. The EU's MiCA framework provides it with permits that are common across the EU, but the United States still lacks comprehensive federal legislation. The fast-moving Senate bill could reshape competition overnight. If the final version gives depositors exclusive rights to issue stablecoins, Circle's license-based model could be forced to work with banks, changing its profit structure.

The problem of market saturation also exists. Stable coins have made many speculative trading pairs liquid. Further growth must come from non-transaction use cases: remittances, merchant settlements, payroll payments, programmable payments. Circle's bet on payments assumes that these use cases will evolve faster than when DeFi lending peaked. If this assumption proves wrong, the company's valuation will fall back to a level that matches only interest income.

Currently, Bitwise's view is that the market is underestimating the value of Circle's options. As stablecoins move towards the trillion-dollar mark at an almost unabated rate, the gap between native cryptocurrency analysts and traditional investors in viewing stablecoin business is becoming a significant pricing inefficiency.