Circle Stock Price on the Verge as USDC Creator Faces Triple Risks
Circle CRCL | 0.00 |
Circle Internet Group (NYSE:CRCL) stock has retreated in the past few weeks and is hovering at its lowest level since February. It has slumped by 75% from its all-time high, and this retreat may continue as it confronts three major risks.
Circle Stock is Facing Major Risks as USDC Supply Dips
CRCL, which operates USD Coin (CRYPTO: USDC) and EURC, is confronting several major risks as the crypto winter continues.
A key risk is that the supply of USDC has continued to drop this month, which will hurt its revenue growth. CoinMarketCap data shows that the market capitalization of USDC has dropped to $73.7 billion from the year-to-date high of $80 billion. Similarly, EURC’s valuation has dropped to $426 million from the year-to-date high of $467 million.
At the same time, US bond yields have continued falling recently as crude oil prices fall after the reopening of the Strait of Hormuz. Brent and the West Texas Intermediate have fallen to $72.6 and $69, respectively. As a result, the two-year yield has dropped to 4.09% from the year-to-date high of 4.235%.
A combination of falling stablecoin supply and US bond yields is that its revenue growth will deteriorate in the near term. That’s because Circle’s business model involves investing its stablecoin reserves in short-term government bonds. Its revenue does well when these reserves and short-term bond yields are in an uptrend.
Analysts expect that Circle’s business will remain under pressure in the near term. The expectation is that its annual revenue will jump by 11% this year to $3.07 billion. Its annual revenue jumped by over 60% last year as its USDC assets jumped.
Circle Internet Group Stock Has Formed a Double-Top Pattern
CRCL is also facing some technical risks, which may drive it lower in the near term. It formed a double-top pattern at $135.70, its highest point in March and May this year. It has now dropped below the neckline of $84, its lowest point on April 9.
The stock has slumped below the 50-day moving average, while the two lines of the MACD indicator have continued falling. Therefore, the stock will likely continue falling, initially to the all-time low of $49. This view is in line with the recent CRCL stock downgrade by Mizuho, who lowered their target to $85.
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