Circle's USDC stablecoin experienced its second consecutive weekly decline, with circulating supply falling to $70 billion in the week ending October 29. The $800 million reduction reflects a broader shift in holder behavior, as redemptions outpaced new issuance for a second straight week.
During the period, Circle issued approximately $10.9 billion in new USDC while redeeming roughly $11.7 billion. The net outflow of $800 million follows a $500 million decline in the prior week, totaling $1.3 billion in outflows over two weeks.
Reserve Position Remains Solid
Despite the declining supply, Circle's reserves stood at approximately $71.4 billion as of October 29, exceeding circulating supply and maintaining full 1:1 backing for each token. The reserves comprised three main components:
- $32.9 billion in overnight reverse Treasury repurchase agreements
- $27.5 billion in US Treasuries maturing in less than three months
- $10.4 billion in deposits at major institutions, including systemically important banks
Circle's reserves have consistently exceeded circulating supply, keeping the token's backing intact. The $11.7 billion in redemptions were handled without apparent strain on reserve adequacy.
Implications for Circle's Business Model
Circle's revenue depends heavily on interest earned from reserve holdings. As USDC supply contracts, fewer dollars are deployed in Treasuries and repos, reducing interest income. The relationship between supply size and earnings has drawn increased attention from shareholders.
Share price targets for Circle have been cut, with analyst downgrades citing concerns that stablecoin demand could shift toward alternatives offering higher yields. Holder behavior patterns suggest rising caution among market participants, with some research pointing to the possibility that investment decisions are being influenced by various factors.
Key Metrics to Monitor
While $1.3 billion in outflows over two weeks represents a modest decline relative to the $70 billion base, Circle's earnings sensitivity to float size ensures the trend draws shareholder attention. Three metrics warrant close observation:
- Net supply change: whether weekly declines continue, stabilize, or reverse
- Gross issuance versus redemption: whether issuance recovers relative to redemptions, indicating renewed demand rather than slowing outflows
- Reserve composition: how Circle allocates holdings between overnight repos, short-dated Treasuries, and bank deposits as supply shifts
