Circle Shares Plunge 9% — Wall Street’s Bear Camp Grows, Four Key Risks Come Into Focus

TradingKey - Amid concerns over its business model sustainability, rising competition from traditional financial institutions, and elevated valuations, Circle (CRCL) — the issuer of the USDC stablecoin — is facing growing scrutiny from Wall Street.

Following downgrades from Goldman Sachs, JPMorgan, and Mizuho, Compass Point has now joined the bear camp, slashing its rating on Circle and sending shares down nearly 9% in early trading on Tuesday, July 22.

New Downgrade Triggers Sell-Off

In a report released Monday, Ed Engel, analyst at Compass Point, downgraded Circle from "Neutral" to "Sell", with a new price target of $130 — implying over 40% downside from Monday’s closing price.

Source: Tipranks

Within the first hour of trading, Circle’s stock dipped as low as $196.78, down nearly 9%. Since its IPO in early June, the stock has surged approximately 600% — after briefly rising fivefold in its first month.

Four Key Risks Weighing on Circle

1. Interest-Rate Dependent Revenue Model

Like Goldman Sachs, Compass Point highlighted that Circle’s profitability is highly sensitive to the Fed’s rate-cutting cycle. As the Federal Reserve lowers rates, Circle’s yield income will shrink.

99% of Circle’s revenue comes from interest earned on its reserve assets — primarily short-term U.S. Treasuries.

JPMorgan estimates that for every 100-basis-point decline in interest rates, Circle’s reserve income drops by $600 million, and its adjusted EBITDA falls by $200 million, assuming a current $60 billion USDC circulation.

2. Intensifying Competition

While Circle’s IPO marked a milestone in the convergence of crypto and traditional finance, the landscape is rapidly changing.

Major banks — including JPMorgan, Citigroup, and Bank of America — are now launching or scaling their own institutional-grade stablecoins, threatening Circle’s dominance in the rapidly growing digital dollar ecosystem.

3. “Sell the News” Reaction

Despite the positive regulatory backdrop — including President Donald Trump’s recent signing of the GENIUS Act, which provides clarity for stablecoins — Compass Point noted that investors may be engaging in “sell the news” behavior, locking in profits after the massive rally.

4. Valuation Appears Stretched

Circle currently trades at a P/E ratio of 250.77, far above traditional financial benchmarks.In contrast:

• Goldman Sachs forecasts a 60x P/E target
• Morgan Stanley projects 45x P/E over the next two years

Such a premium valuation may be difficult to justify if revenue growth slows or competition erodes margins.

According to Tipranks, among 14 tracked analysts:

• 5 rate Circle as “Buy”
• 5 as “Hold”
• 4 as “Sell”

The split reflects growing debate over whether Circle can maintain its leadership in the stablecoin race — or if it’s already priced for perfection.