Bernstein backs Circle to deliver most dominant stablecoin network, maintains $230 price target following Q2 results and Arc blockchain plans

Circle is well placed to become the dominant stablecoin network, according to analysts at research and brokerage firm Bernstein, reiterating their $230 price target for the company’s stock — a potential 40% gain from current levels.

“Our Circle long-term thesis is that the most liquid, regulated stablecoin will win as the dominant stablecoin network,” the analysts led by Gautam Chhugani said in a Wednesday note to clients following the release of its second-quarter financial results on Tuesday.

Despite investor concerns about a potential U.S. entry for rival Tether, as well as new stablecoin competition and rate pressures, Circle’s liquidity, regulatory edge, and payments-focused infrastructure position it for long-term dominance in the analysts’ view.

Investors worry that a Tether U.S. entry under President Trump’s recently signed GENIUS Act could threaten USDC in the country. However, even if a compliant USDT launches, it would start from scratch and lack scale, while Circle’s strong partnerships with banks, payments firms, and major exchanges, along with growing market share, keep it the preferred stablecoin, according to the analysts.

Others are concerned about new stablecoin competition, with firms like JPMorgan, Bank of America, PayPal, and Robinhood having already launched or considering launching stablecoins. However, Circle maintains its edge as the most liquid stablecoin for payments, the analysts said, benefiting from growing market share, network effects across 24 blockchains, regulatory advantages, and a robust infrastructure.

In terms of how Circle could navigate a potential declining rate environment under the Trump administration, Chhugani said Circle’s float income could be hit, but growing USDC demand in digital asset and DeFi markets, increasing market share on Binance, and operating leverage should help offset revenue pressure and support margins.

Circle is going for the “big prize” of transforming payments and financial services with stablecoins that will decide the fate of the stock long-term, the analysts concluded, balancing near-term market gains through partnerships with Coinbase, Binance, and OKX, while navigating the rate environment and building infrastructure like Circle Gateway, Payments Network, and Arc blockchain to secure its future dominance and distribution advantage.

Circle is currently the second-largest stablecoin issuer, accounting for $65 billion of the approximate $260 billion total U.S. dollar-pegged stablecoin supply, per The Block’s data dashboard.

Circle unveils plans for its own Layer 1 blockchain, Arc, amid Q2 financial results

Fresh off the back of its blockbuster $1.2 billion IPO in June, Circle unveiled plans for its own stablecoin-focused Layer 1 blockchain, Arc, on Tuesday, expected to launch on public testnet this fall.

The EVM-compatible chain is designed to provide an enterprise-grade foundation for stablecoin payments, FX, and capital markets applications.

Arc will use USDC as native gas, offering a stablecoin FX engine, sub-second settlement, and opt-in privacy, while fully integrating with Circle’s platform and maintaining interoperability with other partner blockchains, according to the firm.

Arc further creates a demand sink for USDC with more payments and banking-focused transaction volume, the Bernstein analysts said, with USDC gas fees adding to its revenue line.

The news came amid the release of Circle’s second-quarter financial results on Tuesday. In the quarter, USDC in circulation grew by 90% year-over-year to $61.3 billion, with an additional 6.4% growth to $65.2 billion by Aug. 10.

“A key positive was the rise in USDC held directly on Circle’s own platform to 10% of total supply (vs. 6% in Q1), largely driven by ecosystem partners building on Circle’s infrastructure,” the Bernstein analysts said. “These balances incur no distribution costs and Circle retains entire reserve income, increasing margins. Average USDC supply on Coinbase rose slightly from ~22% to ~23% QoQ, while supply on Binance increased from 9% to 13%.”

Total revenue and reserve income increased by 53% to $658 million. Other revenue surged 252% year-over-year, reflecting strong growth in subscription, services, and transaction revenue. Adjusted EBITDA grew 52% year-over-year to $126 million.

However, despite these growth metrics, the company also reported a net loss of $482 million, primarily due to $591 million in IPO-related non-cash charges, including $424 million in stock-based compensation and $167 million from the increase in the fair value of convertible debt. 

“As we have long stressed, Q2 is effectively inconsequential for the crypto names we cover as it was Circle’s June 5 IPO that attracted significant investor interest in digital asset markets,” Chhugani said. “Thus, all evidence points to Q3 being the big quarter worth tracking (Hint: Look at ETH price action and USDC growth in Q3).”

Circle’s stock rose 1.3% to $163.21 on Tuesday following the news, according to The Block’s CRCL price page, but is down 5.4% in early trading on Wednesday.

CRCL/USD price chart. Image: The Block/TradingView.

Chhugani maintains long positions in various cryptocurrencies. Bernstein and its affiliates may receive compensation for investment banking services from Circle.

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