Already on the eve of the war in Iran, Circle (CRCL) could be an unlikely beneficiary of the conflict.
The stock rose 10% on Monday, outperforming other crypto-related stocks, with shares now up 86% over the past month, although they remain significantly down since their peak post-IPO frenzy last summer.
Japanese bank Mizuho said part of the Circle’s rise reflects rising oil prices following escalating tensions in the Middle East. Higher crude prices could reignite inflationary pressures, potentially reducing expectations of a rate cut from the Federal Reserve.
All things being equal, stablecoin issuers are believed to benefit from higher interest rates because this means higher returns on their invested dollars.
Indeed, oil prices have surged since the start of hostilities in the Gulf, with WTI crude up about 35% since February 28. Rising energy prices tend to fuel inflation and can limit the ability of central banks to cut interest rates.
Positioning surely also played a role.
Although the company reported solid growth in USDC supply in its fourth-quarter results, analysts say the size of the move likely reflects a busy short trade ahead of the release.
“The scale of the movement is not just about the numbers. Positioning has been the real catalyst,” said Markus Thielen, founder of 10x Research.
According to its data, hedge funds had accumulated significant bearish bets before the report was released. This setup created what Thielen described as “a high-probability short squeeze rather than a fundamental revaluation.”
Short interest currently stands at about 13% of the float, which equates to about two days to cover, according to FactSet data.
Learn more: Circle moves $68 million in just 30 minutes using its own stablecoin for internal payments
