Circle (CRCL), issuer of the stablecoin USDC, continues to climb, now up 45% in less than two sessions after its fourth-quarter earnings report on Wednesday.
The move ended what had been a steep 80% decline from last year’s record highs.
Although the company saw strong growth in USDC supply, the stock’s outsized reaction was driven more by heavy short bets ahead of the release than by strong financial data, analysts suggested.
“The scale of the movement has not been driven by numbers alone. The real catalyst has been positioning,” said Markus Thielen, founder of 10x Research.
Hedge funds had priced significant bearish exposure into the report, its data showed. This pattern indicated “a high probability of a short squeeze rather than a fundamental revaluation,” Thielen added.
He estimated that hedge funds lost about $500 million in a single day as stocks rose.
A difficult affair
Although Circle’s report produced positive numbers, a deeper analysis of the data shows that the company’s profitability has fallen despite the growing demand for stablecoins.
On fundamentals, Circle’s flagship USDC stablecoin reached $75.3 billion in circulation, up 72% year-over-year and outpacing the growth of rival Tether’s USDT, noted Harvey Li, founder of Tokenization Insight, in a report.
Revenue from reserve income — primarily U.S. government debt backing USDC — rose 58% to $2.64 billion as benchmark interest rates compressed over the past year. But distribution costs climbed even faster, 66% to $1.66 billion, underscoring the expense of incentivizing partners and platforms to expand adoption.
Despite increasing circulation, Circle went from a net profit of $156 million in 2024 to a loss of $70 million, Li noted.
“Stablecoin may be evolving; issuance of stablecoins is a difficult business,” Li said.
Exceed expectations
Still, Circle beat analysts’ forecasts.
Japanese investment bank Mizuho raised its price target on Circle to $90 from $77 after a stronger-than-expected fourth quarter, citing a boost from prediction markets and growing optimism around “agent trading,” in which autonomous AI agents transact using Circle’s USDC stablecoin.
The company reiterated its neutral rating on the stock, warning that falling interest rates could further weigh on reserve income.
Analysts Dan Dolev and Alexander Jenkins said Circle’s results beat revenue and profit expectations, easing investor concerns after a period of pessimism. Management highlighted prediction and betting platforms, particularly Polymarket, as important drivers of USDC’s recent growth, highlighting their high-frequency transaction flows and short-term utility.
Analysts noted that company executives also highlighted USDC’s emerging role in agent trading, describing the stablecoin as a potential default currency for AI agents transacting in digital markets. A growing number of products are built on USDC and connected to the Circle network, with trading and prediction platforms serving as prominent examples of high-speed use cases.
The bank now projects an average USDC circulation of around $123 million in 2027, modeling reserve income of around $3.7 billion and EBITDA of $916 million that year, assuming rate cuts in line with consensus expectations. Applying an EBITDA multiple of 24, a premium to peers such as Visa (V), Mastercard (MA), Coinbase (COIN), and Robinhood (HOOD), the analysts arrived at their new price target of $90.
