Circle’s Biggest Bear Calls It Quits, But Watch Out for the Crypto Roller Coaster!

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Markets

What to know:

  • Well, folks, it seems Compass Point’s own Ed Engel has thrown in the towel on Circle (CRCL), bumping it up to Neutral from the depths of Sell. He’s even slashed his price target to a mere $60, claiming the stock now dances more like a crypto puppet than a savvy fintech.
  • Engel observes that CRCL is now as tangled with ether and the wild crypto cycles as a cat caught in a ball of yarn, with over 75% of USDC supply being tossed around in DeFi or exchanged for shiny digital trinkets, all while still clinging to a fancy premium.
  • There are possible rays of sunshine ahead, like the fabled CLARITY Act and the potential tokenization of good ol’ U.S. assets, which could very well give USDC a boost. But let’s not kid ourselves-Circle is in for a dogfight against new stablecoins and those plucky “deposit coins” from banks, and it might be years before its revenue stops playing hopscotch with the speculative crypto circus.

Ah, Circle (CRCL), the stablecoin magician behind USDC, has received a second pat on the back from Wall Street analysts this week, and wouldn’t you know it, this time it’s from its biggest critic!

Ed Engel-who had previously been waving a sell flag like a madman-has decided to play nice and upgrade the stock to Neutral, just a day after Mizuho’s Dan Dolev decided to swap his gloomy outlook for a slightly less gloomy one.

But hold your horses! Engel still keeps the crown for the lowest price target among Wall Street analysts, with his new price set at $60, down from the lofty $75, and he attributes this to the stock being a tad too posh for its own good (more on that later).

In a bizarre turn of events, the stock took a dip of 7.3% during regular trading hours on Thursday, landing at $67.55, but then decided to rise about 1% in post-market trading because why not keep us guessing?

Engel’s newfound optimism reflects a shifting tale of the stock, which he now insists trades more like a crypto roller coaster than a sturdy fintech ship. Quite the transformation, don’t you think?

After downgrading the stock to sell last July due to the influx of competitors vying for the stablecoin crown, Engel now claims that many of his fears have been priced into the market, a real twist in the ol’ plot line.

He also hinted that the stock could see a silver lining if the long-discussed CLARITY Act finally sees the light of day in 2026, which he sees as a 60% chance. Who knew we’d be betting on legislation like it was the races?

This act might just lay down some clearer rules for stablecoins, potentially giving USDC a bit of a growth spurt. And then there’s the possibility of fancy new tokenized U.S. stocks and ETFs entering the DeFi party-regulatory approval or not. Perhaps that’ll lessen Circle’s reliance on the wild whims of the crypto crowd.

Cyclical nature

According to Engel, Circle is now strutting around like a cyclical stock, which matters quite a bit for our investment strategy. Since the market took a nosedive in October, the digital dollar USDC has been glued to ether’s side, like a faithful hound, with a correlation of 0.66. Engel suggests this trend will likely stick around until mid-2026. The kicker? Over 75% of USDC is currently frolicking in high-risk crypto trading or lending apps.

This means that, despite its so-called “stablecoin” status, USDC is still riding the wild and crazy waves of the broader crypto market, turning Circle into more of a cyclical stock than anyone expected.

And therein lies the pickle-Engel believes the stock is still far too fancy for its own good given its exposure to a cyclical asset class, hence his price target remains the lowest among his peers. Can’t say we didn’t see that coming!

Competition heating up

Engel also raised a red flag about additional risks lurking in the shadows.

USDC supply has taken a 9% dive since December, while sprightly new stablecoins like USDH, CASH, and PYUSD are snatching up market share, particularly on platforms like Solana and Hyperliquid. Not a good look for our pal Circle!

He further noted that the company might guide its 2026 operating expenses above what Wall Street is dreaming of, as many ongoing investments are unlikely to start producing any meaningful revenue anytime soon. Ah, the joys of financial forecasting!

Competition isn’t just coming from the new kids on the block; traditional finance giants like JPMorgan, State Street, and BNY Mellon are charging ahead with their “deposit coins,” ready to take a bite out of USDC’s lunch in developed markets.

While Engel sees a glimmer of hope if crypto markets decide to bounce back or if regulations improve, he wraps up with the sobering reminder that Circle’s revenue will likely remain shackled to speculative activity for a good while yet-and a true escape from the crypto cycles might still be years down the road. So, folks, buckle up and hold onto your hats!

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2026-01-30 01:22