Citi Cuts Crypto Stock Targets Amid Regulatory Uncertainty and Market Slump

Citigroup, one of the largest investment banks in the United States, has adjusted its price targets for several crypto-related stocks in response to the sector's sharp decline in the fourth quarter of 2025. The bank, led by analysts including Peter Christiansen, has maintained a bullish stance on the digital assets sector despite the volatility according to the report. Among the biggest changes is the price target for Circle Financial (CRCL), which remains the top pick for the Citi team at $243, even though the stock has fallen to around $83.60 recently according to the report.

The adjustments reflect a broader trend in the crypto sector, where many stocks have seen significant dips due to uncertainty around regulatory frameworks, market adoption, and macroeconomic conditions. According to analysts, increasing institutional and traditional finance (TradFi) participation is cited as a potential driver for some of the top picks, including Bullish (BLSH) and Coinbase (COIN). However, the price targets for both companies were lowered to account for recent market performance.

MicroStrategy (MSTR), a firm known for its aggressive bitcoin-hoarding strategy, also had its price target reduced to $325 from $485. This reflects the company's recent slump, with shares trading around $160. The bank emphasized that while the price target still offers significant upside, the broader industry must navigate evolving regulatory and market dynamics according to the report.

Implications for the Broader Market

The Citi report underscores the ongoing uncertainty in the digital assets space. While the bank remains optimistic about long-term growth, it acknowledges the challenges posed by regulatory scrutiny and market volatility. The firm's adjustments come at a time when several digital asset-focused companies are being considered for exclusion from major stock indexes according to Reuters. MSCI, for instance, has proposed removing companies where digital assets constitute more than 50% of their total assets, arguing that they resemble investment funds rather than operational businesses. If this rule is finalized, it could significantly impact the demand for shares in companies like MicroStrategy and potentially hurt the sector's appeal to institutional investors according to Reuters.

Investors are also watching how regulatory decisions will shape the broader crypto market. The Department of Justice's large-scale crypto seizures, for example, have raised questions about the future of digital asset compliance and enforcement according to CoinDesk. These developments may further contribute to market uncertainty and investor caution.

Risks to the Outlook

While Citigroup maintains its bullish stance, the report highlights several risks that could hinder the sector's growth. These include the potential for further regulatory restrictions, increased competition among crypto firms, and macroeconomic headwinds such as interest rate trends and inflation. The bank also noted that companies like Gemini, which received a price target cut to $13 from $16, are facing increasing challenges in maintaining market share according to the report.

Another concern is the structural cost-of-operations disadvantage faced by banks like Citigroup in the broader financial sector. Despite efforts to improve profitability and efficiency, Citigroup's net income margin remains below the sector average according to Seeking Alpha. However, the bank's recent performance—including a 69.48% increase in its stock price over the past year—suggests that its transformation initiatives are starting to bear fruit according to Investing.com.

What This Means for Investors

For investors, the Citigroup report serves as both a warning and an opportunity. While the price targets for several crypto stocks have been reduced, the bank still sees upside potential in the long term. Investors are advised to monitor regulatory developments closely, particularly those related to index inclusion and compliance standards. The performance of top picks like Circle and Coinbase will also be critical to watch in the coming months.

At the same time, the market is showing signs of maturation. Bitcoin's price movements are becoming more equity-like, with volatility and price moving in opposite directions—a shift that could signal greater institutional adoption and reduced speculative trading according to CoinDesk. Investors may also benefit from the growing availability of regulated investment vehicles, such as ETFs and DATs, which are expanding the range of tools available for digital asset exposure.