Circle’s recent decline may be overstated, with analysts pointing to a crypto bill that undercuts Coinbase’s edge.

The latest version of the CLARITY Act sparked a sharp decline in both Circle (CRCL) and Coinbase (COIN), but some analysts suggest the market may be misjudging the broader implications of the proposed legislation.

Circle bore the brunt of Tuesday’s selloff after updated provisions targeting stablecoin yield emerged. Although both stocks posted slight recoveries on Wednesday, they remain significantly lower than levels seen before the news broke earlier in the week.

Markus Thielen, founder of 10x Research, believes the bill in its current form could ultimately shift competitive dynamics in Circle’s favor. He argues that the legislation poses a greater threat to Coinbase’s distribution-focused revenue model than to Circle’s position as a core stablecoin infrastructure provider.

Currently, Coinbase captures a large share of the economics tied to USDC through its partnership with Circle. The exchange collects nearly all interest income generated from USDC held on its platform, while off-platform revenue is typically split evenly. Thielen estimates Circle pays Coinbase more than $900 million annually under this arrangement—roughly half of Circle’s total revenue.

This setup has made stablecoin-related income a high-margin business for Coinbase. However, if regulators restrict yield-like incentives on stablecoin balances, that advantage could erode.

Thielen notes that such regulatory changes may increasingly benefit Circle, as a federal framework would likely favor issuers with strong compliance, scale, and balance sheet credibility. He also highlights the importance of the companies’ next commercial renegotiation in August 2026, where Circle could be better positioned to secure more favorable terms.

Separately, Bitwise CIO Matt Hougan argues the recent selloff in Circle appears excessive, emphasizing that the CLARITY Act does not alter the long-term investment thesis.

Hougan points out that yield has not been the primary driver of stablecoin adoption. Instead, growth has been fueled by their utility in facilitating cross-border payments, enabling efficient trade settlement, and providing access to blockchain-based financial systems. As a result, limiting yield is unlikely to significantly impact demand.

He also cites projections that estimate the stablecoin market could grow to between $1.9 trillion and $4 trillion by the end of the decade. As a leading regulated issuer, Circle stands to benefit if activity increasingly shifts toward compliant, onshore platforms.

Additionally, Hougan notes that restrictions on yield passthrough could allow Circle to retain more revenue rather than sharing it with partners like Coinbase, potentially improving profitability over time.

Overall, he يرى a path for Circle to reach a substantially higher valuation—potentially around $75 billion, roughly double its current level.

“If stablecoins develop as expected,” Hougan wrote, “even conservative assumptions still point to Circle as a compelling opportunity.”

About The Author

ctleditor

See author's posts