Woofun AI reports that Circle has been assigned an 'outperform' rating with a $140 target price by Bernstein, signaling renewed momentum for the issuer following a significant expansion in USDC supply. The upgrade reflects a strategic pivot in market sentiment, moving away from months of sideways weakness toward a new phase of expansion driven by structural changes in the stablecoin landscape. This bullish thesis is anchored not merely in speculative crypto market rallies but in tangible growth across transaction volumes, real-world payment integrations, and emerging infrastructure like the Arc mainnet and AI agent economies. The report suggests that these diverse drivers are collectively positioning USDC for a sustained growth cycle, provided that new use cases can translate into consistent balances and revenue streams.

The catalyst for this re-rating was a dramatic shift in supply dynamics observed in the most recent week, where USDC issuance surged by approximately $1.7 billion to $2 billion. This rapid accumulation occurred after nearly six months of stagnation, indicating that the broader recovery in the cryptocurrency market is finally translating into concrete demand for dollar-pegged stablecoins.

Concurrently, Circle's stock price rallied by approximately 42% from its lows, outperforming competitors like OUSD in concentrated market trading environments. This price action underscores investor confidence in Circle's ability to capture market share amidst a competitive landscape, although the sustainability of this rally remains contingent on the successful monetization of its expanding ecosystem. The sheer velocity of this supply increase serves as a leading indicator of institutional and retail re-engagement with the asset.

Structurally, the current stablecoin market exhibits greater resilience compared to previous cycles, underpinned by a more mature macro environment and clearer crypto regulations in the U.S. The total supply of dollar-pegged stablecoins currently stands at around $270 billion, a figure that has remained stable despite a 35% drop in the total cryptocurrency market cap from its peak in October 2025. In contrast, during the 2020–2023 cycle, the combined supply of USDC and USDT reached around $135 billion by early 2022 before falling by about 20% by the end of 2023. This historical comparison highlights the improved durability of stablecoin demand, which is now supported by stablecoin-based payments, tokenization of real-world assets, and AI-powered agent payments. These factors are still in different stages of development, but their collective impact is beginning to shape a new growth trajectory for the sector.

Despite the entry of new issuers such as PYUSD, USDG, USAT, and OUSD, the supply landscape of dollar-pegged stablecoins has not seen fundamental changes in market dominance. By the report's metrics, USDC and USDT together still account for around 97% of the total dollar-pegged stablecoin supply, maintaining a duopoly that new entrants have yet to disrupt. The report suggests that competition among stablecoins depends not only on product design but also on distribution channels, regulatory compliance, infrastructure, and long-term accumulation of liquidity. While new partners can quickly access various stablecoins, actual trading depth and user holdings remain concentrated among leading products. This structural advantage ensures that USDC and USDT continue to benefit from network effects, making it difficult for newer tokens to gain significant traction without substantial institutional backing or unique utility propositions.

Woofun AI data shows that USDC's recent advantage lies more in transaction volume than in supply scale, with adjusted metrics revealing a significant shift in market share. Excluding bots and high-frequency activities, the adjusted transaction volume of stablecoins was around $11 trillion in 2025, rising to around $17 trillion on an annualized basis by July 2026, representing a year-on-year increase of about 60%. Under this metric, USDC has surpassed USDT, with its share of transaction volume rising from around 40% in 2025 to over 60% since 2026. This growth is driven by multiple use cases such as centralized exchanges, decentralized finance, and transfers between wallets.

Notably, USDC's share in wallet-to-wallet transfers rose from around 23% in 2025 to around 50% since 2026, highlighting its increasing preference for peer-to-peer value transfer and its integration into everyday digital financial activities.

The growth in unadjusted total transaction volume is even more significant, reflecting the intensity of on-chain activity. In 2025, the total transaction volume of stablecoins was around $56 trillion; by July 2026, it had reached around $125 trillion on an annualized basis, representing a year-on-year increase of about 120%. USDC's share in this metric rose from 65% to 83%, further cementing its dominance in high-frequency trading and automated activities.

However, total transaction volume includes bots and high-frequency trading, making it more suitable for measuring on-chain activity intensity rather than reflecting actual payments or economic activity. The report links USDC's expansion to the structure of U.S. Treasury financing, arguing that the Treasury's increased buybacks of long-term Treasury bonds help alleviate pressure in that segment, while the U.S. government continues to issue large amounts of short-term Treasury bills.

Since stablecoin reserves typically consist of short-term Treasuries, issuers may absorb some of the additional short-term debt supply if stablecoin supply keeps growing. Within this framework, Bitcoin serves as a hedge against 'hard assets' and currency devaluation, while stablecoins address demand for dollar liquidity and short-term debt. It should be noted that Treasury buybacks are not equivalent to quantitative easing, nor will stablecoin expansion be automatically driven by short-term debt supply.

Stablecoins are entering more real-world business scenarios, although they still primarily involve on-chain transactions and financial activities. In the first half of 2026, the scale of stablecoin-based payments was around $260 billion, compared to around $400 billion for the entire year of 2025. This payment volume represents a year-on-year increase of around 30%, but it accounts for only about 3% of the adjusted stablecoin transaction volume. Business-to-business payments are currently the largest application category, with B2B payments amounting to around $100 billion, accounting for about 40%.

C2C transfers total around $60 billion, accounting for about 25%, while C2B payments amount to around $54 billion, accounting for about 21%. B2C payments, including salaries and business transactions, total around $45 billion, accounting for about 17%. The percentages listed in the report add up to slightly more than 100%, likely due to rounding, so they are better suited for illustrating the general structure. For Circle, the value of its payment business lies in expanding the scenarios for holding and circulating USDC, with the company expanding USDC distribution through banks, fintech platforms, and payment service providers.

However, real-world payments are still a long way from becoming the main source of demand for stablecoins.

The AI agent payment sector presents a different pattern, characterized by a high volume of small-value transactions. As of July 2026, agent payment protocols such as x402 and MPP handled around 19 million transactions in total, with x402 accounting for around 95% of them. The nominal value of these transactions was only around $1 million, with an average of about $0.05 per transaction, mainly involving micro-payments for API calls, data access, and software services. During the same period, the number of active merchant wallets increased from around 1,000 in February to around 10,000 in July.

Circle's Agent Stack has integrated over 900 paid services, with USDC accounting for over 99% of the payments processed via x402. Nearly 20 million monthly transactions indicate that stablecoins are suitable for frequent, small-value payments between machines, but the monthly volume of $1 million is not sufficient to impact USDC's total supply, let alone significantly contribute to Circle's revenue. At this stage, the AI agent economy mainly reflects the adoption of products and infrastructure, and it will take time before it becomes a driver of performance.

Compared to agent payments, Arc is more likely to become the core component of Circle's platform-based valuation, with its public mainnet scheduled to launch on September 16. Founding validators include institutions such as BlackRock, DTCC, Galaxy, Global Payments, ICE, Mastercard, MoneyGram, SBI, Standard Chartered, Sumitomo, and Visa. The report notes that during the private mainnet phase, Arc already processed around 500 million transactions involving around 3 million wallets, with over 100 ecosystem and institutional builders.

These figures primarily reflect testing and development progress prior to the public launch and cannot be directly equated to actual user adoption on the public mainnet. Arc will focus on supporting privacy enhancements, programmable finance, AI agents, and tokenization of real-world assets. Circle hopes to use this to evolve USDC from a simple stablecoin into an underlying asset for on-chain settlement, trading, and collateral.

Currently, Circle has announced a series of institutional partnerships: DTCC plans to explore integrating assets under its custody into Arc for use in securities tokenization, settlement, and collateral applications; BUIDL, BlackRock's tokenized money market fund, is set to expand to Arc; BNY and Standard Chartered are expanding USDC minting, redemption, and custody services; Marex has used USDC for initial margin transactions in regulated derivatives settlement; Nium has integrated USDC into its payment infrastructure covering over 190 countries and regions; JCB, Grupo Bind, Kakao, and OSL are exploring merchant payments, regional liquidity, and digital dollar settlement, respectively.

These partnerships provide institutional backing for Arc, but validator status, technical integration, and partnership agreements cannot yet be directly translated into commercial revenue.

The report assigned Circle a 'outperform' rating and a target price of $140, but it does not disclose the specific valuation model used, so it is impossible to determine how much of the target valuation comes from Arc, payments, and the agent economy. At present, Circle's most certain source of growth still comes from the recovery in USDC supply and an increase in its transaction share. Payments, tokenized assets, and the AI agent economy offer further potential to boost valuation, but these areas still need to go through the transformation process from partnership announcements, infrastructure adoption, to actual asset and revenue realization.

Moving forward, the market needs to pay attention to four key factors: whether USDC supply can continue to grow, whether the adjusted transaction share can be maintained, whether the proportion of real-world payments can increase, and whether Arc can attract real assets and transactions once it goes live. This marks a critical juncture where infrastructure promises must meet commercial reality.