USDC Supply and Circle Valuation: Analyzing the Underlying Logic of the $58 Billion Market Capitalization

Introduction

The recent public market listing of Circle is an important milestone, highlighting the growing demand from institutions for regulated crypto infrastructure. However, the sustainability of its valuation depends on the expansion of its core revenue engine, which is closely related to the total supply of USDC.

This article aims to analyze Circle's valuation structure using data. Over 95% of Circle's revenue comes from USDC-related businesses, making it highly sensitive to short-term interest rates and the total circulation of USDC. We first structurally decompose the USDC supply curve, analyzing changes in on-chain concentration, relative capital liquidity, and inflection points under specific market conditions to identify the key variables driving minting activity.

Next, we introduce a recalibrated autoregressive model that predicts weekly supply with an error margin of approximately ±1.5%, and directly converts the incremental expansion into EBITDA sensitivity.

Finally, we demonstrate how to use this supply metric as a real-time tradable signal, providing market participants with a real-time proxy for Circle's fundamental dynamics.

Circle Valuation Structure Analysis

Based on a market capitalization of $58.2 billion, Circle's price-to-earnings ratio has surpassed that of a certain payment company by nearly 8 times. The firm investments from several well-known institutions indicate that investors are not only pricing for the current fundamentals but are also betting on its potential for widespread adoption in the future.

To maintain its current valuation, Circle must continue to demonstrate a strong trajectory of profit growth. Historical data shows that over 95% of Circle's revenue comes from the interest and dividends generated by its fiat asset reserves backing its stablecoins. Therefore, its revenue is highly sensitive to short-term interest rates and USDC circulation.

EBITDA sensitivity decomposition

As the Federal Reserve approaches interest rate cuts, net interest margins will be compressed, and the market is pricing in a shift where the growth rate of transaction-based revenue will surpass the impact of interest rate compression.

This growth relies on the continued adoption of USDC as a global payment network, with its fee capture ability expanding alongside usage velocity, cross-border capital flows, and ecosystem integration. Therefore, studying the supply dynamics of USDC is crucial. It is not only a leading indicator of Circle's future revenue streams but also a core anchor for its valuation, providing real-time insights into the development of its business model.

Stablecoin Supply Dynamics Analysis

Currently, the total supply of stablecoins has risen to $251 billion, reaching an all-time high, an increase of 34% compared to the peak of the previous cycle in 2021. This reflects a significant inflow of capital and a resurgence of confidence in the crypto ecosystem.

Currently, USDT and USDC account for over 86% of the total supply of stablecoins. Among them, USDT leads with a market share of 62.1%, while USDC closely follows with 24.2%. These two stablecoins play fundamental roles in different ecosystems, particularly USDC, whose development trajectory provides us with a transparent view of regulated, institutional-level demand.

To understand the performance of supply in market cycles, we start with a simple supply flow formula:

ΔSt = Mt - Rt

Among them: ΔSt: Net change in total supply of stablecoins Mt: Minting Volume (Fiat → Stablecoin) Rt: Redemption Volume (Stablecoin → Fiat)

This dynamic reveals the core logic of stablecoin supply:

• Expansion: When the minting volume exceeds the redemption volume, the supply increases.
• Contraction: When the amount redeemed exceeds the amount minted, the supply decreases.

accelerated expansion

With Circle going public, the current circulating supply of USDC has reached a historic high of 61.2 billion USD. This scale reflects the evolution of USDC from a simple transaction-based stablecoin to a recognized core financial primitive. Since 2021:

• The average daily trading volume increased by 406%, jumping from USD 7.77 billion to USD 31.52 billion.
• The number of daily active users has rapidly increased at a compound annual growth rate of 142.92% since 2020, reflecting its rapid adoption across major ecosystems.

The growth of USDC is mainly driven by the following three forces:

1. The Renaissance of DeFi: The interest and participation of the crypto-native user base have surged again.
2. Adoption of traditional finance: gradually being accepted by a broader traditional finance audience in the fields of settlement, cash management, and fund allocation.
3. Strategic cooperation with a trading platform: By partnering with one of the largest crypto user bases globally, USDC gains unparalleled distribution advantages in retail, institutional, and on-chain ecosystems.

![USDC Supply and Circle Valuation: Data Deconstructing the Underlying Logic of $58 Billion Market Capitalization](https://img-cdn.gateio.im/webp-social/moments-f7cdd1f905f70dda633452bd35ff3194.webp01

) Capital efficiency reveals true value

Looking solely at the supply is not enough to reflect the actual utility of stablecoins. More importantly, the real value of stablecoins lies in the efficiency of capital flow.

On a certain trading platform, USDT dominates with a supply of $18.9 billion, while the supply of USDC is only $5.81 billion, about one-third of USDT.

However, in terms of trading volume, the gap has nearly disappeared. In the past 30 days, the trading volume of USDT was 44.8 billion USD, while USDC reached 38.7 billion USD, just 13.6% behind.

By calculating the velocity of funds (i.e., 30-day trading volume divided by circulating supply), we can quantify capital efficiency:

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The results show that the capital velocity of USDC is 2.81 times that of USDT, meaning that each dollar of USDC is traded almost three times more frequently than USDT. This indicates that USDC has a faster capital flow and higher utility, demonstrating a deeper on-chain value.

) Chain-level growth: Expanding to Alt-VM and Layer 2

The supply growth of USDC has gradually shifted from being centered around Ethereum to a broader ecosystem, including a certain public chain, Ethereum Layer 2, and emerging Alt-VM chains.

Data shows that the supply of USDC is increasingly distributed across a diversified ecosystem, aligning with the fastest-growing areas of liquidity, settlement demand, and on-chain utility expansion.

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) The dominance of USDC on a certain public chain

In May 2024, USDC accounted for 99.5% of the stablecoin trading volume on a certain public chain. Even by December, when ecosystem activities became somewhat decentralized, USDC still maintained a 96% market share.

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) The Flippening of a certain Layer 2

In September 2024, USDC quietly surpassed USDT on a certain Layer 2, becoming the dominant stablecoin. At its peak, the supply ratio of USDT to USDC was 2.03 (meaning Tether's supply was more than twice that of USDC). Now, this ratio has dropped to 0.2.

This reversal is mainly attributed to the explosive growth of a certain project, with its total locked value skyrocketing from 600 million USD in the fourth quarter of 2024 to 2.5 billion USD by the end of the first quarter of 2025, an increase of 417%. As of now, the project's bridging deposits have reached a historical high of 3.62 billion USD, which represents a 601% increase compared to the fourth quarter baseline.

This change reflects the unique structural fit between the core ecosystem of a certain Layer 2 and its expanded integration, creating conditions for the dominance of stablecoins.

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) USDC Supply Curve Quantification Model: Capturing Stablecoin Supply Dynamics

Given the importance of the dynamics of USDC supply, we built an autoregressive model to predict the total supply of USDC. We chose the AR model because of its simplicity, transparency, and good performance in the locally linear growth pattern of the USDC supply curve.

The model is recalibrated every 90 days to capture the latest market trends while ensuring that the sample size used for regression and matrix calculations is sufficiently robust. Each forecast period has a dedicated model trained on a 90-day sliding window (7 independent regression models, each with a unique set of beta coefficients). The model uses moving averages (1 day, 3 days, 7 days, 14 days, and 30 days) as feature variables to predict the future average of USDC supply over the next n days, where n ranges from 1 to 7. The regression constant is set to zero to ensure that the model is entirely signal-driven.

This method is very effective in predicting short-term directional changes in supply. Since 2022, the model has predicted that the 7-day average total supply of USDC has an 80% probability of falling within the ±1.5% range of the predicted result.

![USDC Supply and Circle Valuation: Data Deconstruction of the Underlying Logic of 58 Billion USD market capitalization]###https://img-cdn.gateio.im/webp-social/moments-05e60941699c3f821ac17bcf1da87c82.webp(

) Conclusion

The listing of Circle marks an important turning point in the crypto industry. It is not just a capital raise, but also indicates the previously unmet market demand for stablecoins in the public market. Its performance highlights the deep interest of investors in compliant digital dollar infrastructure, further solidifying Circle's position as the most prominent public representative of this emerging asset class.

Currently, Circle's valuation has reached $58.2 billion, becoming a gateway for institutions to enter the regulated digital liquidity space, with USDC at the core of this ecosystem. As USDC continues to embed deeper into the expanding DeFi ecosystem and traditional financial systems, its role is undergoing a transformation. It is no longer just a reflection of adoption rates but has become a real-time global liquidity barometer that can reflect capital flows, risk sentiment, and market positioning. So far, the only way to bet on this growth has been to trade Circle's stock, but the unique factors of stocks often obscure the underlying dynamics.

![USDC Supply and Circle Valuation: Data Deconstruction of the Underlying Logic of the 58 Billion USD Market Capitalization]###https://img-cdn.gateio.im/webp-social/moments-df516a6058aa26e4fd4201a6f03db324.webp(