Circle stock price remains under pressure this year, continuing a downward spiral that started in June last year when it peaked at $298 shortly after its initial public offering (IPO). CRCL stock dropped to $78.50, down by 75% from its highest level in June. This article explores some of the key reasons why the stock has crashed.
Circle stock has crashed as USDC growth stalls
The first main reason why Circle stock has crashed is that data shows that the supply of USD Coin (USDC) has stalled in the past few months.
Data compiled by CoinMarketCap shows that the market capitalization stands at $75.55 billion today. It has remained inside this range since August last year.
While USDC usage has jumped, the market capitalization has remained under pressure in the past few months, which will have a direct impact on its business because of how the business works. Like other stablecoin companies, it makes money by investing its cash holdings in short-term government bonds.
Therefore, there is a likelihood that its revenue growth will remain under pressure in the near term. Data compiled by Yahoo Finance shows that the upcoming revenue will be $751 million, while its annual figure will be $2.72 billion. It is expected to make $3.3 billion this year.
Valuation concerns remain
Circle stock has also plunged in the past few months because of valuation concerns. At its peak in 2025, the company had a market capitalization of $60 billion.
A $60 billion valuation was highly excessive, considering that USDC had a market cap of over $61 billion at that time. Still, despite its recent drop, there are signs that the company is highly overvalued.
Assuming that Circle invests all its assets in short-term government bonds yielding 4%, it will make over $3 billion this year. Its profit will be much lower since Coinbase takes a substantial amount.
Also, there is a risk that its profits will be lower as the Federal Reserve cuts rates. As such, a $20 billion valuation is still relatively high for the company.
Arc Blockchain faces some risks
A potential catalyst for the Circle stock is that it is planning to launch Arc, a layer-1 blockchain network for payments.
Arc has already secured major partnerships with some of the biggest companies globally, including companies like Alchemy, BlackRock, BNY, and Axelar.
The main risk that Arc faces is that the layer-1 and layer-2 industries have become saturated.
While more chains have come up, Ethereum has continued to gain market share. It has a market dominance of 76% in the decentralized finance industry, while Solana and BSC are far behind.
There are other reasons why the Circle stock has remained under pressure. First, analysts have remained neutral on the company, with the most recent notes from Goldman Sachs HC Wainwright, and Wolfe Research having a neutral outlook.
Second, competition in the stablecoin industry is still stiff, with Tether, Ripple USD, USD1, and PayPal USD seeking to gain market share
Third, the stock dropped as cryptocurrencies retreated after the new developments on the CLARITY Act, which stalled in the Senate ahead of its markup.
Circle stock price technical analysis
Technicals also explain why the CRCL stock price has crashed in the past few months. It has remained below all moving averages, and most recently, it formed a bearish flag pattern, which is made up of a vertical line and a rectangle channel.
The stock has also remained below the Supertrend indicator and the Parabolic SAR tool. Therefore, the most likely scenario is where the Circle stock experiences a big bearish breakdown, potentially to the all-time low of $63.
In the long term, however, there is a likelihood that the stock will bounce back as its growth and profitability rise.
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