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FollowingMorgan Stanley downgraded Circle and lowered its target price to US$38. The main reason is the slowdown in USDC growth.
Morgan Stanley downgraded Circle Internet Group (CRCL) to "underallocation" and significantly reduced its target price from US$106 to US$38. Affected by the news, the company's share price fell about 6% in early trading. As of press time, the stock was trading at US$60.88, down 2.76% on the day, reflecting investors 'reaction to pessimistic expectations.
Why Morgan Stanley is cautious about Circle
This downgrade is mainly due to concerns about the slowdown in growth of Circle's flagship stablecoin USDC and increasing competition from tokenized money market funds. Morgan Stanley analysts believe these factors could put pressure on Circle's fee revenue and market share in the rapidly evolving digital asset space. USDC is the second-largest stablecoin by market capitalisation, but its growth rate has lagged behind competitors such as Tether's USDT in recent quarters. At the same time, tokenized money market funds launched by institutions such as BlackRock and Franklin Templeton have also opened up a new competitive front and may divert liquidity from stablecoins.
Market Background and Investor Influence
Circle's share price has fluctuated widely since it went public through a special purpose acquisition company (SPAC) merger earlier this year. Most of the company's revenue comes from interest income generated by reserves that support the USDC, and is therefore sensitive to the interest rate cycle and growth in its own stablecoin supply. The downgrade comes at a time when regulatory review of stablecoins in the United States is increasingly stringent, and new legislation could reshape the way these assets are issued and managed. While some investors see regulation as a good catalyst for Circle, Morgan Stanley's caution highlights the potential for competitive pressures to limit its upside.
What this means for the crypto market
Circle's performance is often seen as a bellwether for the broader stablecoin market, which plays a key role in cryptocurrency transactions and payments. Slowing USDC growth may signal weakening institutional demand for dollar-linked digital assets, while the rise of tokenized funds suggests that the market is shifting to on-chain products that generate revenue. For investors, the downgrade reminds people of the risks faced by stablecoin issuers, including regulatory changes, competition and reliance on interest income, while also emphasizing the importance of focusing on competitive dynamics within the digital asset ecosystem.
Conclusion
Morgan Stanley downgraded Circle to a "low allocation" and set a price target of US$38, reflecting its caution about the company's growth prospects amid slowing USDC adoption and increasing competition threats from tokenized money market funds. Although Circle remains a key player in the stablecoin market, the bank's analysis suggests that recent headwinds could limit stock price performance. Investors should consider these factors together with broader regulatory and market developments when assessing Circle's long-term potential.
FAQ
Q1: Why did Morgan Stanley downgrade Circle?
Morgan Stanley downgraded Circle to "underallocation" due to slowing USDC growth and competition from tokenized money market funds, factors that could put pressure on revenue and market share.
Q2: What is Circle's new target price?
Morgan Stanley lowered its price target for Circle to $38 from $106, reflecting a more pessimistic outlook for the stock.
Q3: How is the market's reaction to this downgrade?
Circle shares fell about 6% after the news was announced, then reported at $60.88, a 2.76% decline on the day.
