Circle Stock Under Siege: Rate Cuts and Lock-Up Expiry Threaten Stability

Circle's stock braces for turbulence as dual pressures mount—central bank rate cuts and looming lock-up expirations squeeze investor confidence.

The Rate Cut Guillotine

With global central banks slashing rates to stave off recession, Circle's yield-dependent business model faces its sternest test yet. The market's punishing anything that smells of interest rate sensitivity—and Circle's caught in the crosshairs.

Lock-Up Liquidation Looms

Insiders get their first chance to bail as share lock-ups expire this quarter. Early investors sitting on 200% gains since IPO won't think twice about taking profits—Wall Street's version of 'thanks for the memories.'

The Crypto Conundrum

While Circle's stablecoin dominance remains unchallenged, traders are treating the stock like a leveraged bet on crypto adoption—never mind that 90% of revenue comes from boring old treasury management.

Watch this space: When the lock-up floodgates open, we'll see who's been swimming naked. Another case of 'great technology, questionable stock' in the crypto-adjacent markets.

Circle stock faces risks ahead

Despite the rally, Circle stock faces several key risks. For one, the growth of USDC has stalled. Its market capitalization remains around $61.7 billion, roughly unchanged over the past few weeks.

On the positive side, USDC’s transaction volume and the number of active stablecoin addresses have jumped by 72% and 20%, respectively, in the past 30 days. Adjusted volume ROSE to $829 billion, while total addresses climbed to 9.7 million.

The other risk is that Circle has become highly overvalued, which likely explains why Cathie Wood has started to sell. Its market capitalization of $58 billion is slightly lower than its combined assets. It is also much higher than its 2024 revenue of $1.67 billion, implying the stock trades at more than 30 times sales which might scare away some invesetors.

There is also macro risk. The Federal Reserve is expected to start cutting interest rates soon. In recent comments, Fed officials Michele Bowman and Christopher Waller said they WOULD support a rate cut at the July meeting.

Rate cuts would hurt Circle’s revenue model, as the company earns most of its income from investments in short-term bonds, whose yields will decline in a lower-rate environment. Additionally, CRCL stock may face selling pressure as the IPO lock-up period approaches its expiry in December, which would allow insiders to begin unloading shares.