Circle stock price has suffered a harsh reversal in the past few days, erasing billions of dollars in value. CRCL shares plummeted to $180, a 40% decline from their highest point in June. So, is the USDC and EURC parent company a good buy in July?
Why the Circle Stock Price Has Imploded
There are four main reasons why the Circle stock price has crashed in the past few days. First, there are signs that some investors who benefited from the surge have started booking profits. Cathie Wood’s Ark Invest has sold shares worth millions of dollars. This is a common occurrence when stocks surge after their IPO.
Second, Circle’s share price has crashed amid concerns about its valuation. Its market capitalization peaked at over $70 billion, higher than the assets in its stablecoins. Its current market capitalization of over $41 billion remains high. Indeed, analysts at JPMorgan, which took it public, see it crashing to $80, significantly lower than its current price of $181.
Third, while the stablecoin hype is continuing, there are signs that Circle’s USDC growth has stalled. USDC has a market capitalization of over $61.5 billion, which it has maintained for the past few weeks. This is a risk that could lead to slow revenue growth.
Furthermore, the Circle stock price is exposed to the risk of interest rate fluctuations set by the Federal Reserve. Most analysts believe that the bank will deliver more cuts than in the past few years. Goldman Sachs expects the bank to cut rates three times this year and more in 2026.
Similarly, analysts at Morgan Stanley expect the bank to cut rates seven times in 2026, as Trump is expected to replace Jerome Powell with a more dovish Chair. Such a move will impact Circle because it invests its funds in US government bonds.
As such, a combination of low interest rates and slow asset growth will likely impact its performance.
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Circle stock price faces other key risks, including the upcoming lockup expiration and competition. In a recent note, analysts at Deutsche Bank said:
“While we see potential for strong long-term industry adoption of stablecoins, the range of outcomes are very wide & likely to create substantial volatility in earnings revisions and the share price for at least the near-to-intermediate term.”
Circle Applies for National Bank Charter
Meanwhile, Circle has applied for a national trust bank charter from the Office of the Comptroller of Currency (OCC). If given this charter, it means that Circle will ditch BlackRock and opt for offering its custody solutions for its reserves.
Circle will become the second crypto company to receive such a charter after Anchorage Digital Bank. Its custody bank will be known as First National Digital Currency Bank.
The bank will offer custody for its own reserves and to other companies. This will make Circle a competitor to Coinbase, a company that offers custody solutions to most crypto ETFs. While the banking charter is beneficial, its impact on the CRCL stock price is likely to be limited.
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