The post How Fed Rate Cuts Threaten USDC’s Stability appeared on BitcoinEthereumNews.com.

The cryptocurrency world is buzzing with a crucial question: how will impending U.S. Federal Reserve interest rate cuts affect major players like Circle? This isn’t just a theoretical debate; it directly impacts Circle’s revenue, especially as the issuer of USDC, one of the leading stablecoins. Recent insights from Omar, a Director at Dragonfly, shed light on a potentially significant challenge facing the stablecoin giant. This analysis offers a clear look at what the future might hold for the prominent stablecoin issuer. What Does This Mean for Circle’s Revenue? Omar’s analysis, shared on X, highlights a stark reality for rate-sensitive companies like Circle. A 100-basis-point cut in U.S. interest rates could have a substantial ripple effect on the company’s financials. Why does this matter so much? Stablecoin issuers like Circle earn a significant portion of their income from holding reserves, often in short-term U.S. Treasury bills, which yield interest. Here’s a breakdown of the potential financial hit: Gross Revenue Reduction: A 100-basis-point cut could reduce Circle’s run-rate gross revenue by an estimated $618 million, representing a 23% drop. Gross Profit Decline: The impact extends to profitability, with gross profit potentially falling by $303 million, a 30% decrease. Margin Compression: Operating margins could also see a squeeze, decreasing by 3.3 percentage points. This detailed breakdown provides a clear picture of the financial pressures Fed rate cuts could impose on a company heavily reliant on interest income from its reserves. How Will the USDC Impact Play Out? To offset the projected revenue loss from lower interest rates, Omar estimates that the supply of USDC would need to increase dramatically. Specifically, the USDC impact necessitates an additional $28 billion in supply to reach a break-even point. This represents a substantial 44% increase over today’s approximately $64 billion USDC circulation. Achieving such growth in USDC…

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Filed under: News - @ August 14, 2025 7:30 am