Circle Fell Again on the Day Arc Went Live: Is the Senate Setback Still the Whole Story?
The three indices closed Wednesday along two different paths. The $Dow Jones(.DJI)$ fell 1.21 per cent to 51,461.90, losing 631.21 points on the day; the $S&P 500(.SPX)$ closed 0.45 per cent lower at 7,551.81, a third consecutive fall; and the $NASDAQ(.IXIC)$ Composite barely moved, closing 0.01 per cent lower at 25,978.42. The Federal Reserve raised rates by 25 basis points that afternoon. All three had been higher before it did, and the turn began with the decision and the press conference.
The target range for the federal funds rate went up to 3.75-4 per cent, from 3.5 per cent to 3.75 per cent before, with all 12 voting members in favour, the first increase since July 2023. What the statement said was that inflation remains elevated. The projections published alongside it showed most officials expect one more increase this year, with the median at 4.1 per cent by the end of this year.
The chair of the Federal Reserve, Kevin Warsh, told the press conference that inflation is too high and has been for too long, and that the Fed had removed a dose of accommodation. He refused to set out what comes next, saying he is not in the forward guidance business. The White House spokesperson called the decision unfortunate on the day, and the US president, Donald Trump, demanded on social media that rates be cut to 1 per cent or lower, putting the increase down to a hostile board while saying he still has confidence in Warsh.
After the decision the 10-year Treasury yield fell first, reaching about 4.95 per cent, with the market reading the move as one increase being enough; once Warsh had finished it went back above 5 per cent and closed at 5.016 per cent, 2 basis points higher than the previous day, a round trip inside one session and a second close above 5 per cent. So what was repriced on the day was not the 25 basis points but his refusal to commit.
The most uniform fall was in the banks. The SPDR S&P Bank ETF closed 2.6 per cent lower, and Goldman Sachs, Wells Fargo, Bank of America and Citigroup all closed more than 3 per cent lower, with Goldman the worst of the Dow's thirty constituents and most of those 631 points coming from there. An increase should in principle widen bank margins, but the reason for this one was not that the economy is strong, it is that inflation will not come down. If rates keep rising, the side that gives way first is the borrower, and the bad debt ends up on the banks' own books.
What held the $NASDAQ(.IXIC)$ Composite up on the same day was chips. $Intel(INTC)$ closed 4.03 per cent higher at US$101.05. Reuters reported that day that $SK hynix(SKHY)$ is in talks with it about making memory chips in the United States for the first time, with two arrangements on the table: leasing part of the Ohio plant, or a joint venture between the two of them and several cloud companies anxious to lock in memory supply. The South Korean maker responded that it is looking at various measures and that nothing has been settled at this stage, and the report has not been confirmed by Intel, which said only that its Ohio investment continues.
Two things still stand between that report and an actual deal. Intel announced US$100 billion of investment in Ohio in 2022, production was meant to start in 2025, and the two plants have now slipped to 2030 and 2031; the foundry business has been running at a loss, and an anchor customer of this size is exactly what it has been looking for. The other stands in South Korea, where advanced memory counts as nationally important technology and projects of this kind can be reviewed under the Industrial Technology Protection Act. $Micron Technology(MU)$ barely moved, closing 0.11 per cent lower at US$926.55 — whether a South Korean maker producing on American soil would erode its home advantage is a question the market left unanswered on the day. SKHY closed 0.02 per cent higher; what rose that day was the Intel side.
The other group that rose was tied to AI hardware. $Lumentum(LITE)$ closed 9.59 per cent higher at US$919.40, the biggest riser in that group, and it had no new orders to show for it — what moved first was the sell side, with Deutsche Bank initiating coverage at Buy with a US$1,200 target and the company raising its long-term guidance at that bank's conference. Guidance is the company's own estimate for several years out rather than orders already signed, and it says nothing about how much of that money is under contract. $Marvell Technology(MRVL)$, $Advanced Micro Devices(AMD)$ and $NVIDIA(NVDA)$ closed between 0.8 per cent and 3.6 per cent higher. $Oracle(ORCL)$ closed 2.00 per cent higher at US$143.16, its first gain since its results, on a day when borrowing got dearer again.
The one that stood out in the other direction was $Circle Internet Corp.(CRCL)$, which closed 6.78 per cent lower at US$80.45, down for a second day. It brought the Arc mainnet live that day, with BlackRock, Visa, Mastercard and DTCC among the founding validators and not a single crypto-native firm among them. A rate rise should also be good news for it, since US$667 million of its US$701 million of revenue last quarter came from interest on reserve assets, and higher rates mean more of that money. It also announced that day that it is buying Tazapay, a cross-border payments firm. None of the three — the launch, the rate rise, the acquisition — held the share price up, and what is still weighing on it comes from the day before: the Senate's procedural motion on the CLARITY Act fell 50 to 49 on 15 September, short of the 60 needed to move it forward.
The above is personal analysis, not investment advice.
💬 【Talking Point】
$Circle Internet Corp.(CRCL)$ brought the Arc mainnet live on Wednesday with BlackRock, Visa, Mastercard and DTCC among the founding validators, and a rate rise lifts the reserve interest that supplied US$667 million of its US$701 million of revenue last quarter. The shares still closed 6.78 per cent lower at US$80.45, a second straight fall. Neither piece of news counted for anything. Is Tuesday's Senate setback still the whole story here?
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The failed CLARITY Act vote is still the main short-term problem because it creates regulatory uncertainty for Circle. The Senate vote was 49–50, below the 60 votes needed.
But CRCL has other important factors:
Arc launched successfully with 100+ institutional/ecosystem builders.
Higher interest rates can support Circle’s reserve income.
USDC continues to grow, with $73.3B in circulation at Q2-end.
However, the market still needs to see real revenue and profit from Arc.
Bottom line: CRCL is facing a mix of regulatory risk + valuation risk + execution risk. Arc is promising, but it needs to prove it can become a profitable business.
CRCL现在的问题，是市场开始同时给它的监管依赖、收入结构和估值打折。
Arc mainnet上线、Visa、Mastercard、BlackRock这些机构参与，当然说明Circle在传统金融基础设施里的位置越来越重要；加息也确实能提高储备资产收益。
但问题在于：
这些利好解决的是“生态能不能做大”，参议院那一票影响的是“做大以后利润能不能留在自己手里”。
Circle上一季度绝大多数收入来自储备利息，所以真正敏感的不是USDC有没有增长，而是未来这部分收益需要分多少给交易所、银行、渠道和用户。
如果监管迟迟没有明确，市场就很难判断它未来的稳态利润率。
我现在会看三个指标：
第一，USDC流通量能不能继续增长；
第二，储备收益中真正留给Circle的比例有没有下降；
第三，Arc、Tazapay这些新业务什么时候能贡献非利息收入。
如果未来Circle能够把收入结构从“主要赚利息”逐渐变成“利息 + 支付 + 清算 + 网络服务”，那监管受挫对估值的冲击会慢慢下降。
反过来，如果收入还是高度依赖准备金利息，那么利率越高虽然短期赚钱越多，市场反而越会问一句：
这部分利润到底有多少是长期可持续的？
所以我觉得这两天下跌真正反映的，不只是法案没过，而是市场开始要求Circle证明：即使没有最有利的监管环境，它也能从一个“吃利差的稳定币发行商”变成真正的金融基础设施公司。
Arc launching with BlackRock, Visa, Mastercard and DTCC is meaningful for Circle’s long-term infrastructure story, while higher rates can support its huge reserve-income business. Yet neither immediately solves what the market wants: regulatory clarity and diversification away from interest income.
The interesting part is that the GENIUS Act framework for stablecoins still exists, so Tuesday did not break Circle’s core business. CRCL may simply be getting repriced for regulatory uncertainty plus its heavy dependence on reserve income.
I’m watching whether Arc can turn those big institutional names into actual usage and revenue.