Circle’s USDC stablecoin saw its circulating supply shrink for the second consecutive week, dropping by $800 million to $70 billion as of October 29. The decline was driven by redemptions outpacing new issuance, with Circle redeeming roughly $11.7 billion in USDC while issuing about $10.9 billion in new tokens during the week.
The latest reduction follows a $500 million drop the previous week, signaling a potential shift in market behavior rather than a one-time event. Despite the outflows, Circle’s reserves remained robust at $71.4 billion, ensuring that each USDC token is still fully backed by cash equivalents. The reserves are primarily held in overnight reverse Treasury repurchase agreements, short-dated US Treasuries, and deposits at major financial institutions.
For Circle as a company, the decline in USDC supply could impact revenue, as earnings are tied to the interest earned on reserves. Analysts have recently downgraded Circle’s share price targets, citing concerns over stablecoin demand and the potential shift toward higher-yield alternatives. Additionally, market participants appear to be adopting a more cautious approach, with some suggesting that AI-driven investment decisions may be influencing holder behavior.
While the two-week outflows totaling about $1.3 billion are not indicative of a collapse, they have drawn attention from shareholders due to the sensitivity of Circle’s earnings to the size of the USDC float. Key metrics to watch in the coming weeks include net supply changes, the balance between issuance and redemptions, and the composition of Circle’s reserves.