Circle's Stock Surges 750% on U.S. Stablecoin Bill, Then Drops 15% on Competition Concerns

Circle, the issuer of the stablecoin USD Coin (USDC), experienced a significant rally in its stock price, which surged over 750% from early June to nearly $300. This surge was partly fueled by the passage of the U.S. stablecoin bill, the GENIUS Act, which aims to provide clear market rules for stablecoins. However, on the 24th of June, Circle's shares dropped 15% to close at $222.81, marking an overall decline of over 20% from the peak of $298.

The pullback in Circle's stock price coincided with rising competition in the stablecoin market and a warning from the Bank for International Settlements (BIS) against the widespread use of stablecoins. The BIS acknowledged the use case of stablecoins in remittance and cross-border payments but warned that their widespread use could undermine affected jurisdictions' monetary sovereignty and create impediments for monetary policy implementation. The regulator also highlighted that stablecoins lack sound monetary arrangements and cannot be the mainstay of the future monetary system.

Analysts showed mixed views on Circle's stock amid the rising competition. Some analysts, such as Artemis founder Jon Ma, flagged stretched multiples for Circle's current valuation, which hit an estimated $74 billion. Ma pointed out that Circle's stock was pricing in perfection with eye-watering figures such as 32x revenue, 80x gross profit, 152x EBITDA, and 285x earnings. Arthur Hayes, Founder of BitMEX and CIO of family office Maelstrom, also stated that Circle is grossly overvalued but the price will continue to levitate due to the stablecoin mania. However, he added that he would sell the stock if a traditional financial institution like JPMorgan Chase unveils its stablecoin.

Compass Point analyst Ed Engel warned that competition in the stablecoin market is expected to accelerate after the stablecoin legislation passes, which could reduce long-term market share expectations and pressure Circle's shares in 2025. The bill is projected to be adopted by the end of summer, attracting even more players in the sector. Despite the competition, the stablecoin market is projected to hit $3 trillion by 2030 and could still boost Circle. Amberdata’s Greg Magadini viewed the $120-$150 range as a great bargain for buying the stock.