Circle’s stock price has pulled back in recent days as post-initial public offering momentum faded.
Circle Internet is trading at $192, down over 35% from its June peak, cutting its valuation from $70 billion to $42 billion.
Several factors have contributed to CRCL’s loss of momentum. First, the decline followed a downgrade from JPMorgan, the bank that led its IPO. The firm initiated coverage with a neutral rating and set a price target of $80, well below current levels.
Second, concerns are growing that Circle is significantly overvalued. Its market capitalization is about $20 billion below USDC’s $62 billion valuation and remains far above its revenue and profit figures.
Circle’s 2024 financial results show revenue of $1.67 billion, up from $772 million a year earlier. Net profit reached $267 million, implying a trailing price-to-earnings ratio of 157, an expensive multiple by most standards.
Third, growth in USDC’s market capitalization has stalled. According to CoinGecko, it has hovered around $61.6 billion for several months. Since Circle earns the bulk of its revenue from interest on U.S. government bonds, a plateau in stablecoin supply could weigh on future growth.
The revenue growth may also be impacted by the Federal Reserve when it restarts its interest rate cuts. In a statement on Tuesday, Jerome Powell said that the bank could cut rates as soon as in July if the upcoming data showed that inflation dropped in June.
Circle stock price has also plunged as some investors book profits after the substantial post-IPO rally. A good example of this is Cathie Wood, whose Ark Invest has sold shares worth millions in the past few weeks.
Circle stock price analysis
CRCL stock chart | Source: TradingView
The hourly chart shows that CRCL has dropped from its all-time high of $298 to $192. On a positive note, the stock found support at the 50% Fibonacci retracement level, near $180.
It has also formed a falling wedge pattern, defined by two descending and converging trendlines. This is generally viewed as a bullish reversal formation in technical analysis.
If buyers step in, Circle stock could resume its uptrend. The next level to watch would be the all-time high of $298. A continuation of the rally is possible ahead of earnings and as interest in stablecoin infrastructure persists.
