Bitwise Projects USDC Growth to $75B After Circle Stock Drops 20%

Circle ($CRCL) shares tumbled 20% on March 24 following concerns about provisions in the U.S. Clarity Act that would restrict yield payments to stablecoin holders. Despite the sharp sell-off, Bitwise analysts issued a bullish outlook, projecting USDC's market capitalization to reach $75 billion.

«A lot of people want to invest in the stablecoin boom, and $CRCL is one of the most obvious choices: pure-play stablecoin company, publicly traded. But how do you value it? @Matt_Hougan says you ask three questions. — How big will stablecoins get? — What will Circle's market…» — Bitwise (@Bitwise), original post

Why This Matters

The stablecoin sector is approaching a critical regulatory inflection point in the United States. The final version of the Clarity Act reportedly includes a prohibition on paying users yield solely for holding stablecoins — a provision that industry representatives have pushed back against. The outcome will reshape the competitive dynamics among issuers and distributors for years to come, affecting companies from Circle to Coinbase.

Bitwise: Market Overreaction

Bitwise Chief Investment Officer Matt Hougan characterized the market's response as exaggerated. According to Hougan, nothing in the Clarity Act news fundamentally alters the outlook for the stablecoin sector. Interest income has never been the primary driver of stablecoin adoption — the vast majority of these assets are currently held in ways that generate no yield for their holders.

Hougan also challenged the prevailing narrative that Circle's market share will erode as major institutions — Bank of America, Stripe, Wells Fargo — begin issuing their own stablecoins. He pointed out that innovators have historically been quite successful at defending the market positions they established early on.

Coinbase Faces Greater Impact Than Circle

Markus Thielen, founder of 10x Research, echoed a similar sentiment while adding a critical nuance. He argued that the market is overlooking the long-term implications: in its current form, the Clarity Act hits Coinbase's distribution model harder than Circle's infrastructure role.

Coinbase captures the lion's share of financial benefit from USDC. The exchange claims nearly all interest income on balances held on its platform, while off-platform balances are split roughly 50/50. According to Thielen's estimates, Circle pays Coinbase over $900 million annually — approximately half of its revenue. This arrangement has made the stablecoin business highly profitable for Coinbase. Should regulators ban yield-like payments on balances, a significant portion of that advantage would evaporate.

Thielen noted that federal regulation will shift value toward issuers that operate within legal frameworks, have scale, and maintain strong balance sheets — a description that fits Circle.

Tether Brings in Big Four Auditor

Adding to the pressure on Circle shares was news from rival Tether. The company announced it has engaged a Big Four accounting firm (Deloitte, EY, PwC, or KPMG) to conduct the first full audit of USDT.

«Tether Signs Big Four Firm to Complete First Full Audit, Setting a New Quality Standard for the Digital Asset Economy» — Tether (@tether), original post

Previously, Tether had only published attestations — a practice that fell short of the Genius Act's requirements and drew repeated criticism. However, analysts at William Blair believe the audit alone won't give Tether a decisive competitive edge. The issuer still faces significant hurdles entering the U.S. market.

A major obstacle, according to William Blair, is the illicit use of USDT, which will likely attract scrutiny from American regulators. Tether's stablecoin is not officially regulated in the United States, though U.S. users can still hold it. In late January, the company launched USAT — a stablecoin specifically designed for the American market.

Broader Regulatory Landscape

These developments unfold against a backdrop of growing global concern over stablecoin risks. In March, the Financial Stability Board under the G20 highlighted increasing threats associated with fiat-pegged digital assets. For Circle, Tether, and the entire sector, regulatory clarity is rapidly becoming the primary competitive differentiator.