TLDR
- Circle (CRCL) stock fell 61% from $298 peak to $114.55 as competition and rate cuts weigh on outlook
- Compass Point analyst Ed Engel cut CRCL to Sell with $96 price target, down 28% from prior forecast
- Hyperliquid’s new USDH stablecoin threatens Circle’s USDC dominance with user interest-sharing model
- Federal Reserve rate cuts expected this month could reduce Circle’s government bond investment returns
- December lockup expiry may add selling pressure as insiders become free to trade shares
Circle stock has crashed 61% from its July peak of $298 to recent lows of $114.55. The CRCL stock price drop has erased $44 billion in market value as multiple headwinds hit the stablecoin company.
Wall Street analyst Ed Engel at Compass Point delivered another blow by cutting Circle to a Sell rating. The analyst slashed his CRCL price target to $96, representing a steep 28% reduction from his previous forecast.
The Circle stock downgrade comes as new competition threatens the company’s core USDC business. Hyperliquid plans to launch its USDH stablecoin with an aggressive user incentive program.
CRCL shares have dropped as early investors exit positions following the IPO momentum fade. Cathie Wood’s ARK Investment Management dumped millions of Circle shares in recent months.
Federal Reserve interest rate cuts expected this month add another layer of concern for Circle stock investors. The company generates revenue by investing reserves in short-term government bonds.
Hyperliquid USDH Poses Direct Challenge to Circle USDC
Hyperliquid’s new USDH stablecoin directly targets Circle’s USDC market share. The competitor plans to share interest income directly with users, undercutting Circle’s value proposition.
Analyst Ed Engel estimates Circle could lose up to $100 million in gross profit if Hyperliquid succeeds in converting users. This represents a structural challenge rather than temporary headwind for the CRCL stock price.
Other stablecoin competitors continue gaining ground in the market. Ripple’s RLUSD has grown to $710 million market cap since launching in December. PayPal’s PYUSD holds over $1.1 billion in market value.
Circle’s USDC remains the second-largest stablecoin with over $72 billion market cap. However, the growth rate has slowed as competition intensifies across the sector.
Circle Financial Results Show Mixed Performance
Circle reported 53% revenue growth to $658 million in its latest quarter. However, net losses increased to $482 million due to non-cash charges including stock compensation.
Analysts project current quarter revenue of $679 million for Circle. Annual revenue forecasts call for $2.61 billion this year and $3.21 billion next year.
The CRCL stock faces additional pressure as the December lockup period expiry approaches. Insiders will become free to sell shares, potentially adding more selling pressure to the market.
Technical analysis shows Circle stock has formed a falling wedge pattern. Some analysts believe this could lead to a bullish breakout toward $150 if buying interest returns.
Despite challenges, Circle’s USDC market cap has doubled from $35 billion last year. The GENIUS Act signing may provide regulatory tailwinds for continued growth in the stablecoin market.
