Circle (CRCL) shares dipped as much as 4% before paring losses on Tuesday after a Wall Street analyst flagged growing risks from rising competition and looming interest rate cuts that could take a bite out of the stablecoin issuer’s revenue.
The stock has surged more than 500% since Circle’s public debut last month at $31 per share, buoyed by optimism around the broader adoption of asset-backed digital tokens.
But Mizuho analysts pushed back on the bullish outlook, initiating coverage with an Underperform rating and a $85 price target, compared with its recent levels above $200 a share.
Circle makes much of its money from interest income — specifically from the short-term Treasury bills that underpin its stablecoin, USDC.
“We believe consensus does not fully account for looming interest rate cuts, and also overstates USDC’s medium-term growth potential,” Mizuho managing director Dan Dolev and his team wrote.
Dolev also pointed to rising distribution costs as Circle shares a portion of its reserve income with partners like Coinbase (COIN).
The analysts also pointed out last month’s passage of the GENIUS Act, legislation aimed at creating regulatory guardrails for the industry, could be the catalyst that brings competing stablecoins to the market.