Written by: Rita

The stablecoin market is undergoing a reversal. After nearly six months of sideways movement or even decline, USDC supply suddenly increased by $1.7 billion in the last week of August, and Circle's stock price has rebounded 42% following a drop triggered by concerns over OUSD competition.

On August 24, Bernstein released a research report stating that this is not a brief technical rebound. A combination of four factors—the macro interest rate environment, expansion of on-chain capital markets, widespread adoption of stablecoin payments, and the emergence of AI agent payments—are driving a new cycle of stablecoin expansion, with Circle, as the largest compliant stablecoin issuer, positioned to benefit significantly. Bernstein maintains Circle's "outperform" rating, with a target price of $140, reflecting a 59% upside from the current stock price.

USDC supply rebound confirms macro logic

The U.S. Treasury's long-end bond repurchase plan is reshaping the macro logic of stablecoins. Bernstein notes that the Treasury intervenes in the long-term yield curve through repurchases while continuously issuing government bonds at the short end. Stablecoins are effectively absorbing this incremental short-term bond supply.

Both Bitcoin and stablecoins are beneficiaries of this macro shift. Bitcoin is sought after as a "hard asset," while stablecoins have become a channel for absorbing short-term government bond supply. The overall recovery of the cryptocurrency market also provides collateral support for stablecoin expansion.

The stagnation of USDC supply over the past six months was primarily affected by weakness in the cryptocurrency market. The current rebound in USDC supply coincides with a revival in the cryptocurrency market, creating a positive feedback loop where rising coin prices boost the value of on-chain collateral, thereby driving demand for stablecoins.

AI agent payments open new growth axis

Stablecoin payments are extending from "person-to-person" to "machine-to-machine."

Bernstein highlights the x402 payment protocol. This is a micropayment protocol designed specifically for AI agents, allowing AI agents to autonomously hold wallets, discover services, and make instant payments using USDC. In August, the x402 protocol processed approximately 20 million transactions, with an average monthly transaction volume of about $1 million and an average transaction price of only $0.05. This may seem trivial, but it represents the true form of nano payments—high frequency, small amounts, and no human intervention required.

The number of active merchant wallets has grown from 1,000 in February to 10,000 in August, with new merchant services continuously being developed. USDC accounts for over 99% of transaction volume in x402 agent payments.

Bernstein believes this is an early signal of the evolution of stablecoin applications from "payment tools" to "digital economy native currencies." While the current scale is still small, the direction is clear.

Circle benefits from blockchain capital markets and payment adoption

As a compliant stablecoin issuer in the U.S., Circle is benefiting from two structural trends.

The first trend is the expansion of on-chain capital markets. Circle's ARC blockchain has attracted institutions such as BlackRock, DTCC, Mastercard, and Visa as founding validators. This blockchain supports asset tokenization and programmable finance, bringing traditional securities on-chain. DTCC plans to bring custody assets on-chain through ARC, and BlackRock's BUILD fund also intends to expand into ARC. Additionally, Circle has collaborated with the CFTC-registered derivatives clearing organization Marex to complete the first derivatives initial margin transaction backed by stablecoins. This is a milestone, with USDC becoming recognized as a qualified collateral in regulated derivatives markets.

The second trend is the continued penetration of stablecoin payments. After adjustments, stablecoin trading volume is estimated at about $11 trillion in 2025, with an annualized run rate of approximately $17 trillion by July 2026, representing a year-on-year growth of about 60%. USDC's market share in adjusted trading volume has increased from about 40% in 2025 to over 60% so far in 2026, with its market share in wallet-to-wallet transfers rising from 23% to 50%.

Real-world payment volumes are steadily increasing. In the first half of 2026, stablecoin payment volumes are about $260 billion, with an annualized growth rate of around 30%. Inter-business payments account for about 40%, making it the largest payment category. Circle has established USDC integrations with over 70% of OUSD alliance partners.

The ARC blockchain public chain is set to officially launch on September 16, with over 100 private mainnet partners. During the testnet phase, approximately 500 million transactions have been processed, covering about 3 million wallets, maintaining 100% uptime during operation.

Bernstein's valuation is based on a long-term discounted cash flow model. The target price of $140 corresponds to an enterprise value of about 23 times the adjusted EBITDA in 2028. Key risks include the high volatility of digital assets, intensified competition from banks and payment institutions, and Circle's revenue relying 99% on interest income in a single-point model.

The stablecoin expansion cycle is driven simultaneously by four forces: macro interest rates, regulatory clarity, payment adoption, and AI agents, forming a structural narrative. Circle is at the intersection of these trends, being the most compliant stablecoin issuer in the U.S. and a natural beneficiary of the expansion of on-chain capital markets.

Disclaimer

This article is a compilation and interpretation of a third-party brokerage research report (Bernstein, August 24, 2026) by Chao Xiang Research, combined with publicly available market information. The ratings, target prices, earnings forecasts, and related judgments quoted in this article represent the opinions of the brokerage analysts and only reflect the views of their respective institutions, not the opinions of Chao Xiang Research, and do not constitute any investment advice.

Markets are risky, decisions should be made independently. This article should not be used as a basis for buying or selling any securities.