TLDR
- Ark Invest purchased 353,328 Circle shares valued at $30.5 million across three ETFs on Wednesday
- Circle stock dropped 12.2% to $86.30 despite strong Q3 results showing $740 million revenue and $214 million net income
- USDC stablecoin circulation grew 108% year-over-year to $73.7 billion, capturing 29% of global stablecoin market share
- Market concerns focus on Circle’s reliance on interest income from reserves amid expected Federal Reserve rate cuts
- Circle CFO Jeremy Fox-Geen defended the business model, saying lower rates could drive growth through increased economic activity
Cathie Wood’s Ark Invest made a contrarian move Wednesday, purchasing $30.5 million worth of Circle shares as the stablecoin issuer’s stock tumbled following its quarterly earnings release. The investment firm acquired 353,328 shares distributed across three exchange-traded funds.
The ARK Innovation ETF purchased 245,830 Circle shares, while the ARK Next Generation Internet ETF added 70,613 shares. The ARK Fintech Innovation ETF bought 36,885 shares, demonstrating Wood’s continued confidence in the USDC stablecoin issuer.
Circle’s stock closed at $86.30 on Wednesday, down 12.2% despite reporting robust third-quarter financial results. The selloff came as investors expressed concerns about the company’s revenue model in a changing interest rate environment.
Strong Earnings Performance
Circle reported $740 million in total revenue for Q3, marking a 66% increase compared to the previous year. Net income jumped 202% to reach $214 million for the quarter ending September 30.
The company processed $9.6 trillion in on-chain volume during the three-month period. USDC circulation reached $73.7 billion by quarter-end, representing a 108% year-over-year increase.
Circle now controls 29% of the global stablecoin market. CEO Jeremy Allaire highlighted the company’s progress in delivering platforms to major startups and financial institutions.
Operating expenses climbed 70% to $211 million, driven by increased headcount and stock-based compensation. However, adjusted operating expenses rose just 35%, showing improved cost management.
Interest Rate Concerns Drive Selloff
The stock decline reflected investor worries about Circle’s revenue composition. The majority of the company’s income comes from interest earned on assets backing USDC, primarily short-term Treasury bills.
Market participants fear this income stream could shrink as the Federal Reserve continues its rate-cutting cycle. These concerns overshadowed the company’s strong operational performance and market share gains.
Circle CFO Jeremy Fox-Geen pushed back against these worries during a Yahoo Finance interview. He emphasized that the company is already navigating a rate-cutting environment while maintaining growth.
“Falling rates lead to greater economic activity, more risk-taking, and increased investment,” Fox-Geen explained. He argued this increased activity could offset any pressure from lower reserve income.
Analyst Outlook and Future Development
Investment bank William Blair assigned an “outperform” rating to Circle stock. Analysts encouraged investors to accumulate shares during the price weakness, viewing Circle as a leader in stablecoin infrastructure.
The firm cited Circle’s Payment Network and Arc blockchain as critical infrastructure components. However, analysts also identified risks including regulatory uncertainty, industry fragmentation, and competitive pressures.
Circle announced plans to explore a native token for its Arc blockchain platform. The company launched the Arc public testnet in October, focusing on programmable finance applications built around stablecoins.
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