Circle stock price retreated for the second consecutive day as the USDC market capitalization fell from the year-to-date high of $80 billion to $76 billion today. CRCL dropped to $109 on Monday, down modestly from the year-to-date high of $140. Still, the rising bond yields may prove to be a bullish catalyst.
Circle Stock to Benefit From Rising Bond Yields
One of the most important themes in the market today is the rising US government bond yields. Data shows that the 30-year yield has jumped to 5.2% for the first time in years. Similarly, the short-term yields have soared, with the two-year rising to over 4%.
Circle makes most of its money in a relatively simple way. It takes its US dollar reserves and invests them in short-term government bonds and keeps the interest. As a result, it benefits when the USDC in circulation is rising and when short-term yields are at an elevated level.
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Short-term US government bond yields have risen in the past few days after the US published strong inflation numbers. The headline Consumer Price Index (CPI) jumped to 3.8% and the Producer Price Index (PPI) spiked to 6%.
As a result, most analysts believe that the bank will not cut rates this year. In a statement, Jeffrey Gundlach, the bond king who heads DoubleLine Capital, said:
“It’s just not possible, in my view, to cut interest rates when the two-year Treasury is almost 50 basis points higher than the Fed funds rate.”
The other major catalyst for the CRCL stock is the CLARITY Act narrative. The Senate Banking Committee has already passed the bill, which will now move to the full Senate. This bill will likely lead to more USDC demand as it leaves the stablecoin yield issue in place.
CRCL will also benefit from the robust predictions of the stablecoin industry. Analysts predict that the industry will move from the current $310 billion to between $1.6 trillion and $4 trillion by 2030. That will benefit Circle, which has a 24% market share in the industry.
CRCL Stock Price Technical Analysis
Circle stock chart | Source: TradingView
The daily chart reveals that the Circle stock has pulled back in the past few days. As a result, it has pared back all the gains it made when it published its financial results.
A closer look at the stock shows that it has remained above the 100-day Exponential Moving Average (EMA). Most importantly, the stock is in the process of forming a cup-and-handle pattern, a common continuation sign in technical analysis. The ongoing retreat is part of the formation of the handle section.
Therefore, the most likely scenario is where the Circle share price rebounds in the coming days or weeks. The initial target to watch will be at $136, the cup’s upper side. A move above that level will point to more gains to $150.
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