Unprecedented! A single quarter settlement of 11.9 trillion, $USDC is becoming the on-chain Visa, but the Federal Reserve's "scythe" is already hanging overhead!

Markets are voting with real money, with $CRCL stock soaring 35% in a single day, from $61 to $83 at close. This marks the largest single-day gain since early October last year. It’s worth noting that the stock has been declining steadily since hitting a high of $298 at IPO in June last year, and even dropped to a historic low of $49.90 in early February this year. This rebound can be seen as a correction of the overly pessimistic sentiment earlier.

The core driver of this earnings report is $USDC. Its circulating supply reached $75.3 billion at year-end, up 72% year-over-year. Despite the overall slowdown in the stablecoin market, $USDC’s market share increased by 4.26 percentage points to 28%. A simple logic is that regulatory controversies faced by competitors have given $USDC an opportunity, and its long-term investment in regulatory compliance is translating into market share.

Even more astonishing is on-chain transaction volume. In Q4 last year, $USDC’s on-chain settlement volume hit $11.9 trillion, a 247% year-over-year increase. This figure is nearly half of the US GDP. Even considering the large amount of arbitrage and wash trading, such growth clearly indicates that $USDC’s penetration as a settlement infrastructure is rapidly expanding.

In terms of revenue, total revenue in Q4 was $770 million, up 77% year-over-year, surpassing analyst expectations. Reserve income contributed $733 million, up 69%. This income comes from investing user deposits in low-risk assets like short-term US Treasuries to earn interest spreads. Although the quarterly reserve yield dropped from 4.1% to 3.8%, the doubling of $USDC’s circulation fully offset the impact of lower interest rates.

What truly ignited market sentiment was the surge in profit. Adjusted EBITDA reached $167 million, a 412% increase year-over-year, far exceeding expectations. After deducting distribution costs, the profit margin rose from 30% to 40%, a full 10 percentage points increase. Scale effects are beginning to show, with marginal costs per additional dollar of $USDC issuance decreasing rapidly.

The earnings report revealed several key business signals. First, progress on the Arc testnet, with over 100 institutions participating, achieving nearly 100% uptime, transaction finality of 0.5 seconds, and an average of 2.3 million transactions per day. Behind these technical parameters is real demand from traditional finance for on-chain settlement. Visa announced that its US partners can use $USDC for settlement, indicating $USDC is starting to penetrate the traditional payment system’s core. The company plans to launch the Arc mainnet by 2026.

Second, Circle’s payment network expansion, with 55 financial institutions registered and an annualized transaction volume of $5.7 billion. Although still small, the direction is crucial—Circle is trying to transform from a single stablecoin issuer into a payment network operator, with much greater business potential than just earning interest spreads.

Other product lines are also growing. The euro stablecoin $EURC has a circulation of €310 million, up 284% year-over-year, with demand being activated after Europe’s MiCA regulation framework was implemented. The tokenized US Treasury product $USYC has an asset scale of $1.5 billion, up 111% quarter-over-quarter, showing increasing institutional acceptance of on-chain yield products.

However, not all news is positive. For the full year, the company recorded a net loss of $69.5 million, mainly due to $424 million in stock-based compensation triggered by the IPO. Excluding this non-cash expense, adjusted EBITDA for the year was $582 million, up 104%.

A potential concern is the downward trend in reserve yields. Market forecasts suggest a 46% chance that the Fed will cut interest rates by 25 basis points in June this year. If rate cuts materialize, Circle’s core interest spread income will face pressure. Management’s profit margin guidance for 2026 remains at 38%-40%, which also hints that the margin expansion potential may be nearing its limit.

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