Circle Stock Hits All-Time Low: Will Lock-Up Expiry Make it Worse?

Circle stock price has been in a strong freefall in the past few months as the post-IPO momentum waned. CRCL has dived to a record low of $66, down by over 77% from its highest level on record.

Circle Stock Price May Crash Further Ahead of Lockup Expiry

The ongoing decline in Circle stock prices could accelerate in the coming weeks as investors brace for the upcoming lockup expiry, scheduled for December 5th.

A lockup expiry is a situation where a company’s insiders and early investors are allowed to sell their shares. This period, which happens 180 days after an IPO, is designed to prevent insiders from dumping their shares immediately after the IPO.

In most cases, this lockup expiry typically leads to a further sell-off of stock as investors anticipate additional share sales.

Circle’s USDC is Losing Momentum Amid the Crypto Crash

The upcoming lockup expiry comes at a time when the company is facing more challenges. One of these challenges is that USDC, its stablecoin, is losing momentum during the ongoing crypto market crash.

CoinMarketCap data shows that the market capitalization of the USDC stablecoin has dropped from the year-to-date high of $76 billion in October to $73 billion today.

More data compiled by Artemis shows that the usage of USDC has slumped recently. The average transaction volume in the last 30 days plunged by over 33% to $1.9 trillion. Additional data indicates that the number of stablecoin addresses decreased by 11.5% to 14.1 million.

These numbers are important because they reveal how Circle generates revenue. It makes most of its money by investing customers’ deposits in short-term government bonds. As such, it means that its revenue growth may deteriorate in this quarter.

USDC is also facing the headwind of competition as other top coins, such as PayPal USD (PYUSD) and Ripple USD (RLUSD), are starting to gain traction, with their market caps jumping to $3.6 billion and $1 billion, respectively.

Federal Reserve Interest Rates Headwinds

The other major headwind facing the Circle stock price is the Federal Reserve. The bank has already slashed interest rates twice this year, bringing the benchmark rate to between 3.75% and 4%.

There are rising odds that the bank will cut rates again in the coming meeting. Polymarket odds of these cuts have jumped to 68% from this week’s low of 50%.

Low interest rates is a major headwind for a company like Circle because it normally means that they make less money. Indeed, the ten-year yield has dropped to 4% from the year-to-date high of 4.8%. More rate cuts will likely drag its earnings lower in the near term.

Circle Has Some Tailwinds

Still, on the positive side, Circle Internet has some tailwinds that may prevent a steeper sell-off. First, the company’s other revenue is growing, thanks in part to its recently launched products, such as the USYC solution.

The other revenue rose to $29 million in the third quarter from $24 million in the previous one. Notably, the other segment made just $1 million in the same period last year.

The management believes that the segment’s revenue will be between $75 million and $85 million this year.

Additionally, Circle is working on Arc, a layer-1 network that will compete with the likes of Ethereum and Solana. Most notably, it plans to launch a token that may create value for the company.

Additionally, the company’s valuation has become more reasonable today. Its market capitalization has dropped to $14 billion, down from over $60 billion a few months ago.

Circle Stock Price Technical Analysis

The daily timeframe chart shows that the Circle stock price has been in a strong downward trend in the past few months and is now hovering near its all-time low.

CRCL has remained below the 50-day Exponential Moving Average (EMA). It has moved below the important support level at $108, its lowest level in September.

Also, the Average Directional Index has also continued rising and is now hovering at its highest level since July this year. Therefore, the stock will likely continue falling ahead of the upcoming lockup expiry.