The Arc token sale has radically improved Circle's 2026 forecasts: analysis
Circle's second-quarter report revealed an interesting nuance that changes the picture of the company's future financial performance. This concerns a significant upward revision of the revenue and RLDC (Revenue Less Distribution Costs) margin forecast. Upon closer inspection, it becomes clear: the main driver of this growth was a one-time sale of tokens from its own Arc blockchain, not a sustainable improvement in operational performance.
Key figures and what lies behind them
Total revenue and reserve income amounted to $701 million, while adjusted EBITDA grew 8% year-over-year, reaching $143 million. However, the most notable aspect is the revision of 2026 targets. The forecast for other revenue was raised to $310–330 million from the previous $150–170 million, and the expected RLDC margin was increased to 41.7–43.7% from 38–40%. Such a jump points to stronger monetization beyond reserves, but, as my calculations show, approximately $180 million of this increase comes specifically from the pre-sale of the Arc token.
Arc is Circle's own first-layer network, where USDC serves as the native gas token. The company is moving up the technology stack: previously it issued tokens for other networks, now it manages its own infrastructure and can earn from transaction fees rather than just reserve yields. The public mainnet launch is scheduled for September 16, and institutional validators already include giants such as BlackRock and DTCC. This gives the network real reach at launch and clear use cases—from securities tokenization to collateral operations.
Risks and sustainability of the business model
Circle's profit depends on three variables: the volume of USDC in circulation, the yield on reserve assets, and the share of that yield that remains after distribution costs. Reserve yield in the second quarter was 3.48% and declined along with SOFR, but this source remains the foundation of the business. A sharp drop in rates is not expected in the near term, so reserve yield should hold. Distribution costs, which consume part of this yield, have just passed their main test: the agreement with Coinbase was renewed on the same terms, and the scenario of the largest partner's share increasing has been taken off the table.
Excluding revenue from the Arc pre-sale, the RLDC margin for the year is expected to be around 39%—that is, in the middle of the previous 38–40% range. This means the underlying business remains stable, but further profit growth increasingly depends on a recovery in the volume of USDC in circulation, which is currently contracting.
Weak on-chain activity weighs on USDC, but a cycle reversal will deliver a strong rebound
Circle's long-term base case assumes USDC volume growing 40% per year. Currently it is contracting, and the investment debate boils down to a key question: will new use cases grow fast enough to offset the cyclical decline in on-chain activity. USDC and USDT are increasingly performing different functions in the on-chain dollar market. USDT primarily works as a payment and transfer tool, while USDC's function is closer to a trading, collateral, and settlement asset. This makes USDC more sensitive to risk appetite within the industry, which currently works against the company: the market remains in a deep downtrend, liquidity has contracted, and on-chain trading volumes have fallen sharply from cycle highs.
However, it is precisely this specialization that gives USDC a favorable position ahead of the next recovery. The bulk of the stablecoin's supply is concentrated in trading, collateral operations, DeFi, and settlements, so circulation is highly cyclical: supply contracts when on-chain liquidity falls, but can accelerate quickly when trading volumes, leverage, and capital return to the market.
My comment: Circle's forecast revision is more of a tactical maneuver than a fundamental breakthrough. The one-time sale of Arc tokens gives the company a financial cushion to weather the downtrend, but the key test is whether the Arc ecosystem can generate sustainable fee streams after launch. If the network lives up to institutional partners' expectations, USDC will gain new structural demand that does not depend on the whims of the retail cycle.