- Circle stock price has rebounded in the past few months.
- Odds of the Federal Reserve hiking rates have jumped on Polymarket.
- Technical analysis points to more gains, possibly to $200.
Traders on Polymarket and Kalshi are increasingly betting on an interest rate hike this year, which will benefit the soaring Circle stock price. CRCL has already jumped by 150% from its lowest level this year, and the uptrend may continue if the Fed goes on with interest rate hikes.
Traders are Betting on a Federal Reserve Interest Rate Hike
The recent hot inflation numbers have pushed traders on Polymarket and Kalshi to predict that the Federal Reserve will hike interest rates this year.
A Polymarket poll shows that odds of a hike have jumped to 22% from this month’s low of 8%. Similarly, odds of a hike happening this year have jumped to 36% on Kalshi.
Polymarket odds of rate hike | Source: Polymarket
While these odds are still low, it is notable that most traders believe that the Federal Reserve will not cut interest rates this year. Odds of a cut happening before the end of the year have dropped from 94% in February to 65% on Kalshi.
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These odds are happening because of the ongoing war in Iran that has pushed inflation higher. Crude oil prices have soared from below $60 earlier this year to over $100 today, while natural gas has soared by triple digits after Qatar slashed production. Therefore, analysts believe that consumer prices will jump to 3% this year.
Still, instead of hiking interest rates the Fed may decide to maintain interest rates steady for an extended period. Besides, Jerome Powell will be replaced by Kevin Warsh in the next few months. Warsh was nominated by Trump who has made a case for cutting rates.
Also, the Fed may forego rate hikes because of the situation in the labor market, where the economy shed over 92,000 jobs in February. The unemployment rate has jumped to 4.4%.
Circle Benefits From High Rates and USDC Supply
These events will benefit Circle stock because of its business model. Ideally, Circle operates as a bank, where customers give it cash, which it uses to invest. The main difference is that the company can only invest in short-term government bonds. These bonds are more sensitive to the actions of the Fed.
As a result, higher rates together with the rising USDC reserves mean that the company will make more money than expected this year. Data compiled by Artemis shows that USDC supply has jumped by over $10 billion in the last 30 days to $81 billion today.
At the same time, Circle is working to diversify its revenue sources from interest rates. It has done that by launching USYC, which has become the biggest money market fund in the crypto industry. It has also launched Circle Payment Network (CPN), which aims to disrupt the Swift network.
Circle Stock Price Forecast: Technical Analysis
CRCL stock chart | Source: TradingView
Technical analysis suggests that the CRCL stock may continue rising as the company faces major tailwinds. It has jumped from $48 in February to the current $126.
The stock’s Supertrend indicator remains in the green and above the 50-day moving average. It has also soared above the 23.6% Fibonacci Retracement level.
The most likely scenario is where the Circle stock may continue rising in the near term, with the next key target being at $200. Such a move will be a 60% surge from the current level.
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