Amid mounting concerns, Mizuho has downgraded Circle (CRCL) from a neutral to an underperform rating, significantly lowering its price target from $85 to $50, indicating a projected decline of over 41%. The current trading price for Circle stands at $63.22, suggesting a potential downside of around 21%. Mizuho analyst Dan Dolev identifies Open USD, a competitor launched on June 30 and supported by over 140 firms, including Visa and Mastercard, as a major threat to Circle's business model.
Open USD’s business structure allows companies to mint and redeem the token without fees while retaining earnings from reserves. Dolev noted that this model could disrupt Circle's reliance on treasury yields for revenue. “We believe that over time, distribution partners will be emboldened to demand more from CRCL,” Dolev stated, emphasizing the risks Circle faces in retaining its market position.
In parallel, JPMorgan has also cut its estimates for Circle and Coinbase (COIN), highlighting the growing strain on the financial foundations of USDC. Analyst Kenneth Worthington pointed to the revised revenue-sharing arrangement between Circle and Hyperliquid, which he described as creating a “prisoner’s dilemma” for both companies. This change may compel them to compete against one another rather than collaborate effectively, further complicating their distribution efforts for USDC.
As the cryptocurrency market struggles, Circle has seen its stock decline by more than 20% this year. The bearish outlook persists as both Mizuho and JPMorgan signal ongoing challenges in the company's operational framework.
This material is for informational purposes only and does not constitute financial advice.
