Circle Stock Plummets 15% as Wall Street Warns of Stablecoin Competition: Analysis of Falling Stock Price and Future Prospects for Circles USDC Stablecoin Business
Shares of Circle (CRCL) fell 15% on Tuesday, retreating from a stunning rally fueled by optimism over stablecoin regulation and adoption. The decline came as Wall Street shifted its focus to the rising risk of competition in the digital token space.
The stock had soared in recent weeks after the Senate passed the GENIUS Act last week, legislation that would establish a federal framework for digital tokens backed by assets such as the US dollar. However, the same regulatory clarity that lifted Circle shares is also expected to open the floodgates for new competition once the bill is finalized later this summer.
"In the near term, we expect CRCL to continue trading off bullish momentum around stablecoin adoption," Compass Point analyst Ed Engel wrote in a note Tuesday. "But we expect competition to accelerate after stablecoin legislation passes. This influx of competition could reduce long-term market share expectations and pressure CRCL shares in 2025."
Engel and his team initiated coverage of the stock with a Neutral rating and $205 price target. Circle generates most of its revenue from "reserve income" - interest earned on assets backing its USDC stablecoin, a large part of which are short-term US Treasurys. The company also earns income from services such as blockchain integration and fees for redeeming USDC for dollars.
On Monday, fintech firm Fiserv (FI) announced plans to launch a digital asset platform, including a new stablecoin (FIUSD) by the end of this year using existing infrastructure from issuers Paxos and Circle. "For CRCL, we like seeing its inclusion as a leading partner of FI as FI develops its own stablecoin - this is a nice 'win' for CRCL which highlights the company's ongoing rise," Seaport Research Partners analyst Jeff Cantwell wrote in a note on Monday.
Last week, Cantwell initiated coverage on Circle with a Buy rating and a $235 price target. Shares have soared roughly 620% from their IPO price of $31 on June 5.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre. Click here for in-depth analysis of the latest stock market news and events moving stock prices. Read the latest financial and business news from Yahoo Finance.
