Circle Stock Forecast as Earnings Loom Amid USDC Woes

Circle Internet Group stock has bounced back in the past few days, moving from the year-to-date low of $58.50 to the current $71. This rebound happened as odds that the CLARITY Act will pass rose. Still, the stock faces some major risks ahead of its earnings as USDC supply falls.

CLARITY Act Odds Boost Circle Stock

Traders on Polymarket are betting that the CLARITY Act will be signed into law this year. Data shows that these odds have risen to 47% from a low of 32% earlier this month.

Circle Internet is one of the top companies set to benefit when the vote passes because of its role in the industry. It has become the second-biggest company in the stablecoin industry after Tether Holdings.

The CLARITY Act’s main goal is to simplify how the crypto industry is regulated. For one, it splits the oversight between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). CFTC, which is seen as a friendly regulator, will become the primary one, while SEC will regulate digital assets that qualify as securities.

The bill will also define digital commodities and simplify the stablecoin yield issue. After months of negotiations, banks and crypto companies reached a compromise that bans interest-like stablecoin yield, while allowing certain rewards.

USDC Supply and US Bond Yields Fall

Circle stock remains under intense pressure as it prepares to publish its financial results early next month. The most important challenge is that the USDC supply has continued falling this month.

USDC, its main product, has dropped to $73.17 billion, its lowest level since February this year. It has been in a downtrend after peaking at $80 billion earlier this year.

The same is happening with the EURC stablecoin, whose market capitalization has dropped to $437 million from the year-to-date high of $467 million.

The value of these stablecoins has dropped during the crypto winter. This is important because the falling USDC and EURC supply means that its revenue growth will be muted.

On the positive side, data shows that US bond yields have continued rising as the US-Iran war has escalated. The two-year yield jumped to 4.25%, a few points below the year-to-date high of 4.297%. Also, the one-year yield has moved to 4.073%.

The challenge, however, is whether the rising bond yields will be enough to offset the falling assets.

Looking ahead, the next key catalyst for the CRCL stock price will be its second-quarter earnings report. Yahoo Finance data shows that the average estimate is that its revenue will come in at $720 million, up by 9.48% YoY. This revenue growth, while good for a crypto company during a downturn, is much slower than that of other top tech companies.

This slowdown explains why analysts are concerned about its business. Most recently, Compass Point’s Ed Engel placed a target of $62, much lower than where it is today.

David Koning, a Baird’s analyst, lowered the target from $138 to $100, while Goldman Sachs slashed the target from $111 to $96.

CRCL Stock Price Technical Analysis

The daily chart shows that the Circle stock formed a double-top pattern at $136.45 and a neckline at $84.57, its lowest level in April. It has remained below the 50-day Exponential Moving Average (EMA).

The Average Directional Index (ADX) has dropped to 20, its lowest level since June 8. A falling ADX indicator is a sign that the ongoing retreat is losing momentum.

Therefore, the stock will likely resume the downward trend, potentially to the key support level of $50. The bearish outlook will become invalid if it jumps above the key resistance at $85.