Circle, the issuer of USD Coin (USDC), is facing renewed concerns as the likelihood of a U.S. Federal Reserve interest rate cut in September intensifies. Analysts warn that such a move could severely dent Circle’s revenue model, which heavily depends on Treasury yields.
Circle’s business model relies on investing customer reserves into U.S. Treasuries, with interest income serving as its primary revenue source. According to crypto analyst TheOneandOmsy, a 100 basis point rate cut could slash Circle’s gross revenue by 23% and shrink its gross margin by nearly 30%, putting Circle Internet Group’s financial performance under major strain.
The company has acknowledged these risks in its quarterly filings and has been working to diversify its revenue streams. Expanding the $28 billion USDC supply is seen as crucial to mitigating the fallout of a rate cut.
Hyperliquid Threatens Circle’s Dominance
Adding to Circle’s challenges, decentralized trading platform Hyperliquid announced plans to issue its own stablecoin, USDH, which could end USDC’s monopoly on the exchange.
? #Circle could lose 10% of its revenue overnight.
A new rival, #Hyperliquid’s USDH, is rewriting the rules of stablecoins.Here’s how it threatens Circle’s $USDC dominance — and why it matters ?? pic.twitter.com/oLHgPc9MPF
— CCN (@CCNDotComNews) September 8, 2025
Hyperliquid recorded $7.03 billion in 24-hour trading volume, representing roughly 10% of USDC’s total market capitalization. If USDH is successfully deployed, Circle risks losing a significant portion of its transaction-driven revenue base.
While Circle has indicated it does not plan to compete for USDH’s deployment, it is preparing defensive measures. The company recently unveiled plans to roll out CCTPv2 (Cross-Chain Transfer Protocol version 2) on Hyperliquid, alongside its Circle Payment Network (CPN). These upgrades aim to make USDC faster, cheaper, and more interoperable across blockchains, ensuring it remains more attractive than newer entrants like USDH, which may struggle with liquidity at launch.
Now open on Circle Payments Network (CPN): Payments from Canada to Latin America, Hong Kong, and Nigeria@Paytrie is now live on CPN, powering remittance flows and settling with speed, compliance, and reliability.
Stablecoin settlement. Fiat payouts. Real-world impact.
CPN… pic.twitter.com/rHixNx1Lje
— Circle (@circle) September 8, 2025
Circle’s Crossroads
With the Fed’s September 16 rate decision looming and a new competitor emerging, Circle faces a double challenge:
Macroeconomic risk from potential Fed cuts reducing interest revenue.
Competitive risk from USDH threatening its dominance on Hyperliquid.
Whether Circle can retain its leadership in the stablecoin sector will depend on its ability to innovate, scale USDC adoption, and defend against rivals while navigating a shifting macroeconomic landscape. Its recent movement of launching Arc for financial applications is one of their strategies to battle in the stablecoin war.
