Circle (CRCL) Plunges 5.95% Amid Regulatory Uncertainty and Profitability Concerns

Summary
• CRCL’s stock tumbles 5.95% to $81.82, hitting an intraday low of $81.02
• Leveraged ETFs CCUP, CRCG, and CRCA all trade down over 11%
• Q3 revenue surges 66% to $740M, but net income remains negative at -$1.41B

Circle Internet Group’s stock has plunged nearly 6% in volatile intraday trading, driven by a mix of regulatory uncertainty, insider selling, and analyst skepticism. Despite a 66% revenue surge and conditional approval for a digital currency bank, the market remains wary of Circle’s profitability challenges and regulatory risks. The stock’s sharp decline has outpaced even leveraged ETFs, signaling a bearish sentiment shift.

Regulatory Approval Fails to Alleviate Profitability Doubts
Circle’s 5.5% drop follows its conditional approval to launch First National Digital Currency Bank, a strategic move to expand its digital banking footprint. However, the market’s reaction suggests skepticism about the bank’s profitability, given Circle’s current negative profit margins (-10.27%) and -$1.41B net loss. Analysts like Mizuho and Deutsche Bank have downgraded price targets, while insider sales by directors Rajeev Date and Nikhil Chandhok—totaling $15.95M and $7.71M respectively—have amplified concerns about governance and confidence. The stock’s decline also reflects broader worries about regulatory scrutiny of stablecoins and the sustainability of Circle’s USDC-driven growth.

Infrastructure Software Sector Mixed as Microsoft (MSFT) Gains 0.32%
Bearish Options and ETFs Highlight Short-Term Volatility
• T-REX 2X Long CRCL Daily Target ETF (CCUP): -11.43%
• Leverage Shares 2X Long CRCL Daily ETF (CRCG): -11.62%
• ProShares Ultra CRCL (CRCA): -11.99%
• 30D MA: $81.58 (near current price)
• RSI: 59.31 (neutral)
• Bollinger Bands: Upper $93.52, Middle $81.66, Lower $69.80
• MACD: -3.13 (bearish divergence)

Key levels to watch include the 30D support at $86.26 and the Bollinger Band lower bound at $69.80. The RSI’s neutral reading and MACD’s bearish signal suggest short-term consolidation below $85. Leveraged ETFs like CCUP and CRCG could amplify downside risk if the stock breaks below $80. Two options stand out for bearish exposure:

• CRCL20260102P75 (Put)
- Strike: $75, Expiry: 2026-01-02
- IV: 61.94% (moderate)
- Leverage: 91.36%
- Delta: -0.1787 (moderate sensitivity)
- Theta: -0.0459 (moderate time decay)
- Gamma: 0.0295 (responsive to price swings)
- Turnover: 20,549 (high liquidity)
- Payoff at 5% downside (ST = $77.73): $2.73/share. This put offers strong leverage and liquidity for a bearish bet.

• CRCL20260102P77 (Put)
- Strike: $77, Expiry: 2026-01-02
- IV: 60.15% (moderate)
- Leverage: 62.76%
- Delta: -0.2443 (higher sensitivity)
- Theta: -0.0414 (moderate decay)
- Gamma: 0.0366 (high responsiveness)
- Turnover: 52,682 (exceptional liquidity)
- Payoff at 5% downside (ST = $77.73): $0.73/share. This contract’s high gamma and turnover make it ideal for aggressive short-term bearish plays.

If $80 breaks, CRCL20260102P77 offers a high-gamma, high-liquidity route to capitalize on the decline.

Backtest Circle Stock Performance
The backtest of CRCL's performance after a -6% intraday plunge from 2022 to now shows mixed results. The 3-Day win rate is 39.44%, the 10-Day win rate is 38.03%, and the 30-Day win rate is 35.21%. While the ETF has positive returns over some short periods, the overall trend is negative, with a maximum return of only 1.98% over 30 days. This suggests that CRCL tends to recover slowly after significant intraday drops.

Circle’s Volatility Warrants Cautious Positioning Amid Regulatory and Profitability Risks
Circle’s sharp decline reflects a tug-of-war between its explosive revenue growth and unresolved profitability and regulatory challenges. While the stock’s 5.95% drop has brought it closer to the 30D MA and Bollinger Band lower bound, the path forward hinges on regulatory clarity and improved margins. Investors should monitor Microsoft’s (MSFT) 0.32% gain as a sector barometer and watch for a breakdown below $80, which could trigger a test of the $69.80 support. For now, bearish options like CRCL20260102P77 and leveraged ETFs offer tools to hedge or capitalize on near-term volatility.