Circle’s 620% rally snaps as Wall Street warns of stablecoin showdown

• Circle dropped over 20% from Monday’s peak of nearly $300. 
• Analysts showed mixed views on the stock amid rising competition. 

The stock of stablecoin issuer Circle’s shares (CRCL) entered a brief cool-off on the 24th of June after doubling in the previous three days of trading. 

From early June, the stock has surged over 750% from pre-IPO $31 to nearly $300, fueled partly by last week’s passage of the U.S. stablecoin bill, the GENIUS Act. 

On the 24th of June, Circle’s shares dropped 15% to close at $222.81. Overall dump exceeded 20% when measured from the peak of $298.

The pullback coincided with rising competition and a warning by the Bank for International Settlements (BIS) against stablecoins. 

Source: CRCL, TradingView

BIS warns: Stablecoins can’t steady the system

In the recent report, the central bank body BIS acknowledged stablecoins’ use case in remittance and cross-border payments but warned that, 

“The widespread use of stablecoins could undermine affected jurisdictions’ monetary sovereignty. Currency competition can create impediments for monetary policy implementation.” 

Stablecoins are digital dollars or other traditional currencies or commodities, backed 1 to 1 by relevant reserves. 

The regulator further poured cold water on stablecoins for ‘lacking sound monetary arrangements’ and highlighted, 

“Thus (stablecoins) cannot be the mainstay of the future monetary system.”

That said, CRCL’s wild run was due for a little break, according to some analysts.

Valuation alarm bells? 

In fact, according to Artemis founder Jon Ma, Circle’s current valuation hit an estimated $74 billion, eclipsing Block ($38B), Robinhood ($68B), and Nubank ($59B), and sitting just $4B behind Coinbase.

Ma flagged stretched multiples: 32x revenue, 80x gross profit, 152x EBITDA, and 285x earnings. These eye-watering figures suggested the stock was pricing in perfection.

A similar stance was made by Arthur Hayes, Founder of BitMEX and CIO of family office Maelstrom. 

“To be clear, Circle is grossly overvalued, but the price will continue levitating. The listing marks the beginning, not the end of this cycle’s stablecoin mania”

But he added he would sell the stock if a TradFi like JPMorgan Chase unveils its stablecoin. And, the banking giant has been testing a stablecoin offering.

Likewise, Bank of America, Walmart, and Amazon are all exploring stablecoin as the GENIUS Act advances to the House. This trend and risk of competition have been flagged by Wall Street analysts.

Circle’s moat faces stress test as giants hover

In the note shared on the 24th of June, Compass Point analyst Ed Engel warned that, 

“We expect competition to accelerate after stablecoin legislation passes. This influx of competition could reduce long-term market share expectations and pressure CRCL shares in 2025”

The bill will offer clear market rules and could be adopted by the end of summer, attracting even more players in the sector.

Even so, the stablecoin market is projected to hit $3T by 2030 and could still boost Circle. In this light, Amberdata’s Greg Magadini viewed the $120-$150 as a great bargain for buying the stock. 

“Taking ownership of the stock around $120-$150 seems interesting to me.”