Circle Faces the Threat of Rate Cuts: Will USDC Be Impacted in 2025?

• How Vulnerable Is Circle to Falling Interest Rates?
• Can Circle Offset Revenue Losses with Growth?
• Why Is Tether’s Strategy More Resilient?
• What Does This Mean for Stablecoin Investors?
• FAQs

The potential reduction in the Federal Reserve's benchmark interest rates has raised concerns among stablecoin issuers, particularly Circle, the company behind USDC. With its revenue heavily tied to U.S. Treasury yields, Circle could lose up to 23% of its income if rates drop by 100 basis points. Meanwhile, Tether (USDT) has diversified into bitcoin and gold, reducing its reliance on Treasury bonds. This article explores the risks for Circle, the resilience of Tether, and what this means for stablecoin investors in 2025.

How Vulnerable Is Circle to Falling Interest Rates?

Circle’s business model relies significantly on the yields from U.S. Treasury bonds, which back its stablecoin, USDC. If the Federal Reserve cuts rates by 100 basis points—as some analysts predict—Circle could lose nearly a quarter of its revenue. Omar Kanji, a specialist at Dragonfly, suggests this WOULD push Circle’s EV/EBITDA ratio from 42 to 60.4, indicating a potential 50% valuation increase despite declining profits. But here’s the catch: higher valuations don’t always mean stronger fundamentals.

Can Circle Offset Revenue Losses with Growth?

Circle would need to expand its USDC supply by 44% (from $64 billion) to compensate for lower Treasury yields. However, USDC’s adoption growth has slowed since April 2025, making this a tough sell. To diversify, Circle recently launched the Circle Payments Network (CPN), enabling real-time cross-border transactions using regulated stablecoins. Will this be enough? Only time will tell—but for now, the pressure’s on.

Why Is Tether’s Strategy More Resilient?

Tether (USDT) has taken a different approach. In June 2025, it slashed its Treasury bond holdings by 90%, shifting into Bitcoin, gold, and private equity. This move insulates USDT from rate fluctuations, though it introduces new risks. The payoff? Tether reported $2.6 billion in unrealized gains from Bitcoin and gold alone—far outpacing Circle’s performance.

What Does This Mean for Stablecoin Investors?

For USDC holders, the key question is stability. If Circle’s revenue drops, will it maintain its 1:1 dollar peg? Tether’s diversification looks savvy, but crypto volatility adds uncertainty. Investors should weigh these risks carefully—especially with rate cuts looming.

FAQs

How would Fed rate cuts affect Circle’s revenue?

A 100-basis-point reduction could slash Circle’s income by 23%, as its earnings depend heavily on Treasury yields.

Why is Tether less exposed to rate cuts?

Tether holds Bitcoin, gold, and equities alongside Treasuries, reducing its reliance on interest income.

Is USDC still safe if Circle’s revenue declines?

Circle claims its reserves fully back USDC, but prolonged revenue drops could strain its operations.