Circle stock price crashed after earnings: Will it rebound?
Circle's stock price has experienced a significant decline, falling from $300 to $86, reducing its market cap from $60 billion to $19.9 billion. While Circle's latest financial results revealed strong revenue growth (+66% YoY to $740 million) and profitability (+202% YoY net income to $214 million), concerns have arisen about stagnant USDC growth and decreasing transaction volume, as well as potential Federal Reserve rate increases that could affect income driven by interest. Additionally, the upcoming December lock-up expiration could prompt insider selling, further pressuring the stock. The company is preparing to launch its Arc layer-1 mainnet and token, which could unlock substantial value if successful, and is expanding its stablecoin-powered Circle Payment Network (CPN). Technically, the stock remains bearish, with analysts forecasting a continued decline toward key support levels.
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Circle Stock Price in Freefall
Circle stock price has been in a strong freefall in the past few months, a situation that accelerated after it published its second quarterly results as a publicly traded company. It plunged to a low of $86, down sharply from its all-time high of $300. This plunge has brought its market capitalization to $19.9 billion, down from a record high of $60 billion.
Financial Performance Highlights
Circle stock price has been under pressure as the momentum it had after going public began fading. The crash intensified following its financial results, which showed slowing growth despite positive numbers. Highlights include:
- The USDC supply ended the quarter at $73.7 billion, growing 108% YoY. This figure has since grown to over $75 billion.
- Revenue came in at $740 million, up 66% YoY.
- Net income surged by 202% YoY to $214 million.
These figures underline that Circle remains highly profitable, despite slowing growth momentum.
Launch of Arc Layer-1 Solution
One of the key announcements in the earnings report was about the upcoming mainnet launch for Circle's Arc layer-1 solution. The testnet has already attracted over 100 companies, including notable brands like Aave. Additionally, Circle plans to launch the Arc token, a move that could unlock millions or even billions in value depending on network performance.
This is significant as popular layer-1 networks like Ethereum and Solana have achieved multi-billion dollar valuations. Furthermore, Circle's Payment Network (CPN) initiative continues to expand, leveraging stablecoin technology to enhance transaction speeds and reduce costs.
Reasons Behind the Stock Drop
Circle stock price dropped after earnings for several reasons:
- Concerns over USDC growth: The market cap of $75 billion has remained stagnant, and Artemis data shows a decline in transaction volume within the last 30 days.
- Interest rate uncertainty: Analysts predict further rate hikes by the Federal Reserve, with Polymarket odds for a rate cut in December jumping to 75%. Future rate cuts could accelerate under new Federal Reserve leadership, as successor candidates favor rate reductions. Since Circle generates most of its revenue from interest, rate changes are critical.
- Lockup expiry risks: The lockup expiry in December allows insiders to sell shares, raising concerns over potential share dumping, which could further pressure the stock.
Technical Analysis of CRCL Stock
The technical indicators for Circle stock show a persisting downtrend:
- The stock has plummeted from its peak of $299 to the current $86.
- It has fallen below $108, invalidating the previously forming double-bottom pattern.
- The price is below all moving averages, while oscillators are pointing downward.
Given these signals, the likely scenario is a continued decline, with sellers targeting the key support level at $80. A reversal above the resistance level at $108 would invalidate this bearish outlook.