Original author: Eric, Foresight News
In June 2026, what seemed like a good show of bottoming out and rebounding for Circle just began and then came to an abrupt halt. As of June 25 US local time, the circulating supply of USDC has dropped to 73.6 billion, down about 7 billion from its peak, while Circle's stock price has also been nearly halved to around $63.
On the surface, 7 billion is less than 10% of 800 billion. For comparison, the circulating supply of USDT next door once reached a peak of around 191 billion, and now remains around 186.3 billion, having decreased by only 4.7 billion, a reduction proportion of less than 3%.
While there is no evidence directly linking the decline in USDC's circulating supply to the drop in Circle's stock price, their synchronized movement, along with the coincidental timing of security incidents in the DeFi space and Circle's stock price decline, inadvertently supports the view expressed by Compass Point analyst Ed Engel as early as January this year:
Circle is a barometer for DeFi activity.
Engel believed at the time that Circle trades similarly to cyclical stocks. From October 2025 to January 2026, the correlation coefficient between the USDC circulating supply curve and ETH's price trend reached 0.66. The core reason is this: 75% of USDC circulates in scenarios like cryptocurrency exchanges and DeFi protocols, while the amount of USDC actually used for daily consumption and cross-border payments is far lower than imagined.
Looking at the Etherscan USDC holding address rankings, a large number of contract addresses appear on the first page. These USDC reside in protocols or addresses such as DeFi, exchange multi-signature wallets, and cross-chain bridges. Furthermore, the top 100 USDC holding addresses on Ethereum account for over 50% of the USDC supply, with just 0.32% of the addresses holding 93.55% of the total supply. A vast amount of USDC is placed in protocols to earn yields higher than bank deposits.
This level of concentration is not what a "digital dollar" intended for daily circulation should have. You might counter by pointing to USDT's even higher concentration on Ethereum, but it's very common for the Web3 industry to use USDT for salary payments, the foreign trade sector to use USDT for settlements, gray/black markets to use USDT to evade regulation, and third-world countries to use USDT to protect savings. These are practical use cases.
Although perhaps not as "glorious" as USDC, these scenarios also form the foundation of USDT. This has simultaneously led to USDT, which should theoretically be the most used stablecoin for crypto trading pairs, outperforming the more compliant USDC in terms of shrinkage during such a weak market. The news today that the local price of USDT in India is already at an 8% premium to its normal price also corroborates this view.
The overall TVL of DeFi started declining from mid-April, coinciding with the beginning of the Kelp DAO hack incident. Circle's stock price began its decline from mid-May. Although the starting times were spaced apart, the subsequent trends are largely similar.
Just last month, Circle and Coinbase jointly pushed USDC to become the settlement stablecoin on Hyperliquid. The cost was not only having to stake 500,000 HYPE tokens each but also ceding 90% of the income generated from the reserve assets backing USDC on Hyperliquid. Behind this seemingly "win-win-win" situation on the surface lies Circle's helplessness: the DeFi space, its main battleground, has begun to shrink rapidly. The Kelp DAO incident severely damaged DeFi's credibility. Waiting for DeFi to naturally increase the volume of USDC has hit a bottleneck, forcing Circle to "fend for itself."
If you observe closely, you'll find that USDC is not only the settlement asset for Hyperliquid but also for platforms like Lighter. Outside the cryptocurrency field, Circle is also sparing no effort to promote USDC "to be used as dollars." According to Artemis data, the "organic transfer volume" of USDC (excluding wash trading, high-frequency trading, exchange wallet consolidation, etc.) in 2025 was $18.3 trillion, while USDT's was $13.2 trillion.
It's an undeniable fact that USDC is widely used in institutional and compliant payment scenarios. However, the amount of USDC needed for these scenarios is not as high as one might imagine. The flow of funds may not always be in the form of USDC; instead, USDC might serve as an "intermediate state," reducing the time and capital costs of transfers between banks or financial institutions.
In other words, to increase the supply of USDC by 10 billion might require trillions of dollars in actual capital flow in the real world, but on-chain, it could just be a few large DeFi protocols, Memecoin trading platforms, or prediction markets. No matter how fast USDC circulates or how high its usage rate is in reality, if the issuance volume of USDC doesn't increase, neither will revenue nor profits.
Of course, none of this is enough to "pronounce a death sentence" on Circle. If in the future Circle can break free from its reliance on DeFi, or demonstrate that real-world usage significantly drives the growth of USDC issuance, then the investment logic for Circle might be rewritten. But in the short term, attention likely still needs to focus on whether DeFi can break the shackles of "asymmetric returns and risks" and give the market more confidence.
