Circle sent 63% of Q4 USDC reserve income to distributors, compressing margins.

Circle Internet Financial reported fourth quarter earnings showing the stablecoin issuer paid $460.6 million in distribution and transaction costs against $733.4 million in reserve income, representing approximately 63% of gross yield generated from customer deposits.

The company’s USDC stablecoin circulation reached $75.3 billion at year-end, up 72% year-over-year, according to the earnings report. Reserve income increased 69% while adjusted EBITDA grew fivefold compared to the prior year period.

Total revenue and reserve income reached $770.2 million for the quarter, with distribution costs accounting for nearly 60% of earnings, according to the financial statements. Circle retained $272.8 million in net reserve income after distribution payments.

The company publishes “Revenue Less Distribution Costs” as a core performance metric each quarter. Circle’s net reserve margin settled at 37% in the fourth quarter, meaning the issuer retained approximately $0.37 for every dollar of gross reserve yield.

Stablecoin issuers generate income by holding user deposits in reserve portfolios consisting primarily of short-term Treasury securities and similar instruments. Circle reported a 3.8% reserve return rate in the fourth quarter, down 68 basis points year-over-year. Average USDC in circulation doubled from $38.1 billion to $76.2 billion during the period.

Distribution costs rose 52% year-over-year, according to the earnings report. Circle attributed the increase to “increased distribution payments” to exchanges, wallets, and fintech platforms that provide user access. The prior-year period included a $60 million one-time fee to a distribution partner, previously disclosed.

Circle’s five-quarter trend data shows distributors consistently claimed approximately 63% of reserve income each quarter. Distribution payments are tied to placement agreements and transaction flows rather than fixed technology costs.

The company’s risk disclosures state it may be “unable to maintain existing relationships with financial institutions and similar firms or enter into new relationships.” Circle flags potential pressure to accept “less favorable financial terms” with distribution partners and highlights “dependence on a few key distributors” as a structural constraint.

Circle tracks a metric called “USDC on Platform,” measuring the share of total USDC held across partner platforms. That figure reached $12.5 billion at year-end, up 459% year-over-year, with a daily weighted average of 17.8% of total circulation, according to company data.

Treasury bill yields remained in the mid-3% range as of late February 2026. Market expectations contemplate potential Federal Reserve rate cuts in coming quarters, according to financial market data. A declining rate environment would compress reserve income while distribution costs may prove less flexible, potentially pressuring issuer margins.

Circle’s guidance reflects margin compression relative to the fourth quarter’s 40% RLDC margin, according to the company’s forward-looking statements. The guidance indicates distribution costs may not decline proportionally to reserve income in a lower-rate environment.

In most stablecoin implementations, users do not directly receive yield on their holdings. Issuers earn reserve income and negotiate distribution agreements with platforms that control user access. Distributors do not bear balance sheet risk associated with reserves.

The GENIUS Act, referenced in Circle’s regulatory disclosures, establishes a U.S. framework for payment stablecoins. The legislation formalizes regulatory requirements for stablecoin issuers.

Circle’s operational risk disclosures focus on distributor relationships rather than traditional liquidity concerns. The company states that major partners could change incentive structures, promote competing stablecoins, or develop proprietary infrastructure. Such shifts could reallocate transaction flows and distribution economics.

Circle’s reserves are liquid, audited, and managed conservatively, according to company disclosures. The balance sheet is structured to withstand redemption surges.

The company’s “USDC on Platform” metric monitors concentration of balances across distribution partners. Higher concentration on specific platforms affects negotiating leverage in distribution agreements.

Market dynamics in the stablecoin sector increasingly focus on securing and maintaining distribution relationships with platforms that control user access. Issuers compete for placement on exchanges, wallets, and payment rails that determine transaction flows.

Circle’s fourth quarter results showed the company generated $733.4 million in reserve income and allocated $460.6 million to distribution and transaction costs, leaving $272.8 million in net reserve income before operating expenses.

Circle Internet Financial reported fourth quarter earnings showing the stablecoin issuer paid $460.6 million in distribution and transaction costs against $733.4 million in reserve income, representing approximately 63% of gross yield generated from customer deposits.

The company’s USDC stablecoin circulation reached $75.3 billion at year-end, up 72% year-over-year, according to the earnings report. Reserve income increased 69% while adjusted EBITDA grew fivefold compared to the prior year period.

Total revenue and reserve income reached $770.2 million for the quarter, with distribution costs accounting for nearly 60% of earnings, according to the financial statements. Circle retained $272.8 million in net reserve income after distribution payments.

The company publishes “Revenue Less Distribution Costs” as a core performance metric each quarter. Circle’s net reserve margin settled at 37% in the fourth quarter, meaning the issuer retained approximately $0.37 for every dollar of gross reserve yield.

Stablecoin issuers generate income by holding user deposits in reserve portfolios consisting primarily of short-term Treasury securities and similar instruments. Circle reported a 3.8% reserve return rate in the fourth quarter, down 68 basis points year-over-year. Average USDC in circulation doubled from $38.1 billion to $76.2 billion during the period.

Distribution costs rose 52% year-over-year, according to the earnings report. Circle attributed the increase to “increased distribution payments” to exchanges, wallets, and fintech platforms that provide user access. The prior-year period included a $60 million one-time fee to a distribution partner, previously disclosed.

Circle’s five-quarter trend data shows distributors consistently claimed approximately 63% of reserve income each quarter. Distribution payments are tied to placement agreements and transaction flows rather than fixed technology costs.

The company’s risk disclosures state it may be “unable to maintain existing relationships with financial institutions and similar firms or enter into new relationships.” Circle flags potential pressure to accept “less favorable financial terms” with distribution partners and highlights “dependence on a few key distributors” as a structural constraint.

Circle tracks a metric called “USDC on Platform,” measuring the share of total USDC held across partner platforms. That figure reached $12.5 billion at year-end, up 459% year-over-year, with a daily weighted average of 17.8% of total circulation, according to company data.

Treasury bill yields remained in the mid-3% range as of late February 2026. Market expectations contemplate potential Federal Reserve rate cuts in coming quarters, according to financial market data. A declining rate environment would compress reserve income while distribution costs may prove less flexible, potentially pressuring issuer margins.

Circle’s guidance reflects margin compression relative to the fourth quarter’s 40% RLDC margin, according to the company’s forward-looking statements. The guidance indicates distribution costs may not decline proportionally to reserve income in a lower-rate environment.

In most stablecoin implementations, users do not directly receive yield on their holdings. Issuers earn reserve income and negotiate distribution agreements with platforms that control user access. Distributors do not bear balance sheet risk associated with reserves.

The GENIUS Act, referenced in Circle’s regulatory disclosures, establishes a U.S. framework for payment stablecoins. The legislation formalizes regulatory requirements for stablecoin issuers.

Circle’s operational risk disclosures focus on distributor relationships rather than traditional liquidity concerns. The company states that major partners could change incentive structures, promote competing stablecoins, or develop proprietary infrastructure. Such shifts could reallocate transaction flows and distribution economics.

Circle’s reserves are liquid, audited, and managed conservatively, according to company disclosures. The balance sheet is structured to withstand redemption surges.

The company’s “USDC on Platform” metric monitors concentration of balances across distribution partners. Higher concentration on specific platforms affects negotiating leverage in distribution agreements.

Market dynamics in the stablecoin sector increasingly focus on securing and maintaining distribution relationships with platforms that control user access. Issuers compete for placement on exchanges, wallets, and payment rails that determine transaction flows.

Circle’s fourth quarter results showed the company generated $733.4 million in reserve income and allocated $460.6 million to distribution and transaction costs, leaving $272.8 million in net reserve income before operating expenses.

Key takeaways:

• Bitcoin derivatives show persistent fear despite the current rally toward $70,000, as seen by futures premiums being pinned well below neutral levels.

• The markets’ cautious stance stems from broad risk-aversion and lingering concerns over institutional BTC liquidations and Bitcoin network security.

Bitcoin (BTC) retested the $70,000 level on Wednesday, recovering from Tuesday’s low of $62,500. While inflows into Bitcoin exchange-traded funds (ETFs) helped stabilize market sentiment, the momentum failed to restore confidence within the BTC derivatives markets. Traders remain concerned that underlying factors are preventing a sustained rally toward $75,000.

US-listed Bitcoin ETFs recorded $764 million in net inflows over two days, partially offsetting the $1.2 billion in outflows seen during the previous eight trading days. These large movements are typically attributed to institutional activity, suggesting strong demand when prices dip below $65,000. 

Despite this demand, the appetite for leveraged bullish positions in BTC futures has dropped sharply.

The annualized premium for Bitcoin futures relative to spot markets sat at 2% on Thursday, remaining well below the 5% neutral threshold. Bullish momentum has been largely absent since Jan. 31, the date Bitcoin surrendered the $85,000 support level after holding it for over nine months. Data from the options market further indicates that professional traders are prioritizing the avoidance of downside exposure.

Bitcoin put (sell) options traded at a 14% premium compared to equivalent call (buy) instruments on Thursday. In a neutral market environment, this indicator typically fluctuates between -6% and +6%, signaling that fear remains a dominant force. Although this skew metric has improved from the 28% “panic” levels recorded on Tuesday, the recovery to $70,000 has done little to shift the cautious outlook of derivatives traders.

Is a single entity behind Bitcoin’s price weakness?

Recently, a number of unproven theories have been proposed to explain Bitcoin’s 32% decline over seven weeks. This downward trend began following the Oct. 10, 2025, market crash, which eliminated $19 billion in leveraged positions across the cryptocurrency sector. This volatility coincided with US President Donald Trump announcing a 100% increase in import tariffs on Chinese goods.

Following that event, Binance reportedly provided $283 million in compensation to users affected by liquidations attributed to internal oracle pricing errors, system latency, and asset transfer degradation. Binance co-founder and former CEO Changpeng “CZ” Zhao has since refuted allegations that the exchange intentionally triggered the October 2025 crash.

Other market participants have linked the recent bearishness to concerns over quantum computing. These fears intensified after Jefferies strategist Christopher Wood removed Bitcoin from his “Greed & Fear” model portfolio in January, citing potential risks to long-term security. In response, developers drafted a proposal, BIP-360, which focuses on advancing post-quantum cryptography onchain.

Related: Coin Bureau CEO on Bitcoin in 2026–Cycles, Liquidity and a Divided Market

The most recent explanation for Bitcoin’s lackluster performance involves the quantitative trading firm Jane Street. These claims gained momentum after Terraform Labs’ court-appointed administrator sued the company, alleging insider trading related to transactions that accelerated the collapse of the Terra Luna ecosystem in May 2022.

Jane Street’s recent 13-F filing disclosed significant holdings in BlackRock’s iShares Bitcoin Trust ETF and various Bitcoin mining companies. However, Julio Moreno, head of research at CryptoQuant, noted that such activity is typical for delta-neutral strategies. 

Ultimately, the 5% decline in Nvidia (NVDA US) shares on Thursday following strong earnings suggests a growing risk-averse sentiment among investors, which may partially explain why Bitcoin struggles to reclaim the $75,000 level.