Circle (CRCL) Stock: Downgraded on Fears Hyperliquid’s Stablecoin Could Undermine Business

TLDR

Table of Contents

Circle stock (CRCL) has dropped to $114.55, down from a peak of $298, losing $44 billion in market cap
Compass Point analyst Ed Engel cut Circle to Sell rating with $96 price target, down 28% from previous forecast
Hyperliquid’s new USDH stablecoin threatens Circle’s USDC business by offering users direct interest income sharing
Federal Reserve rate cuts expected this month could reduce Circle’s revenue from government bond investments
Circle’s lockup period expires in December, potentially adding more selling pressure from insiders

Circle Internet Group stock has been hammered in recent months as multiple challenges pile up for the stablecoin company. The stock dropped to $114.55 last week, marking its lowest point since June 16.

This represents a dramatic fall from its July peak of $298. The decline has wiped out $44 billion in market value, bringing Circle’s market cap down to $26 billion from a high of $70 billion.

Wall Street analyst Ed Engel of Compass Point delivered another blow this week by cutting Circle to a Sell rating. He slashed his price target to $96, representing a steep 28% reduction from his previous forecast.

The downgrade comes as Circle faces mounting pressure from new competition. Hyperliquid is preparing to launch its own stablecoin called USDH, which poses a direct threat to Circle’s USDC business.

About 7.36% of USDC's total supply is held by Hyperliquid.
Biggest holder of USDC.
They plan to launch their own stablecoin, "USDH".
Why?
– They rely heavily on Circle's USDC.
– $5.5B locked in USDC, ~95% of their liquidity.
– Cut spot trade fees by 80%.
– To capture… pic.twitter.com/bIEb0Ie1va
— Param (@Param_eth) September 8, 2025

Hyperliquid plans to offer users a compelling incentive to switch from USDC to USDH. The company will share interest income directly with users, undercutting Circle’s value proposition.

Early investors have been dumping shares as the post-IPO momentum fades. Cathie Wood’s ARK Investment Management sold millions of Circle shares in recent months, following a common pattern after public listings.

Competition Heats Up in Stablecoin Market

Circle’s USDC remains the second-largest stablecoin in the crypto industry. However, new competitors are gaining ground rapidly.

Ripple’s RLUSD stablecoin launched in December and has grown to a $710 million market cap. PayPal’s PYUSD now holds over $1.1 billion in market value.

Engel estimates that if Hyperliquid succeeds in converting a large portion of users, Circle could lose as much as $100 million in gross profit. For a company that depends heavily on USDC-related revenue, this represents a serious threat.

The analyst views this competitive pressure as a structural challenge rather than a temporary setback. This could weigh on Circle’s earnings for the foreseeable future.

Federal Reserve Rate Cuts Add Pressure

Economic data has confirmed that the Federal Reserve will likely cut interest rates by 0.25% or 0.50% this month. The economy created just 22,000 jobs in August while unemployment rose to 4.3%.

Most concerning for investors, the economy lost jobs in June for the first time since the pandemic. These rate cuts could impact Circle’s revenue growth since the company makes money by investing reserves in short-term government bonds.

Circle reported mixed financial results in its latest quarter. Revenue jumped 53% to $658 million, but net losses increased to $482 million due to non-cash charges.

Analysts expect current quarter revenue of $679 million. Annual revenue is projected to reach $2.61 billion this year and $3.21 billion next year.

The company’s lockup period expires in December, which could add more selling pressure. When insiders become free to sell their shares, it often leads to additional stock declines.

Despite the challenges, USDC’s market cap has grown to over $72 billion from $35 billion a year ago. This growth may continue after the signing of the GENIUS Act.

Technical analysis shows the stock has formed a falling wedge pattern, which could lead to a bullish breakout toward $150 if buying interest returns.

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