Summary
- Circle's CRCL stock dropped 18% on Tuesday following the announcement of a new stablecoin, Open USD, set to launch later this year.
- However, analysts from Clear Street argue that the market's reaction was disproportionate, given the backing by major players like Visa, Mastercard, and Coinbase.
- The stock saw a 3% recovery on Friday but remains 75% below its highest value from the past year.
Circle (CRCL), the issuer of the USDC stablecoin, experienced an 18% decline in shares on Tuesday due to the announcement of Open USD, a competing stablecoin supported by prominent partners such as Coinbase, Visa, and Mastercard. Despite this, analysts from Clear Street believe the market’s reaction was an overreaction.
“Even though OUSD has reputable partners akin to leading stablecoins, without concrete evidence of its potential success, the sell-off appears excessive,” analysts stated in a note on Wednesday.
While the launch of OUSD later this year might pose a narrative threat, analysts observe that Circle’s USDC stablecoin has demonstrated resilience despite the emergence of new competitors.
“Although the narrative may persist, CRCL has sustained significant market shares despite the ongoing introduction of new stablecoins,” they noted. “Our preliminary evaluation suggests that OUSD is analogous to USDG (Global Dollar Network stablecoin), which has not captured considerable market shares.”
Circle's CEO, Jeremy Allaire, addressed the concerns regarding the OUSD launch, emphasizing the robustness of his company's offerings and the "massive scale" of the USDC network—something that OUSD will lack initially.
Allaire mentioned that effective stablecoin networks require a diverse array of services and applications, substantial liquidity, and a “deep integration with the policy and regulatory landscape.”
“All of these investments by Circle and our vast network of thousands of partners have resulted in establishing the world’s most trusted and accessible digital dollar infrastructure,” he posted on X, asserting that his company does not plan to slow its progress.
Currently, USDC ranks as the second-largest stablecoin and the fifth-largest cryptocurrency overall, boasting a market capitalization exceeding $73 billion. Tether’s USDT remains the leading stablecoin, with a market cap of $184 billion.
Circle's shares made a slight recovery on Wednesday, increasing by 3% to approximately $64.55. However, CRCL shares are down over 18% in the past six months and are still more than 75% lower than their 52-week peak of $262.97.
In their Wednesday assessment, Clear Street set a 12-month price target for Circle at $157, indicating a potential increase of about 140% from the price at which it was trading on Wednesday.