Shares of USDC stablecoin issuer Circle (CRCL) continue to soar, rising 45% less than two trading days after releasing its fourth-quarter earnings report on Wednesday.
The move ends a brutal 80% retracement from last year’s all-time high.
Analysts said that despite strong growth in the company’s USDC supply, the stock’s sharp reaction was more due to the large number of short bets on the upcoming publication than strong financials.
“The magnitude of the move is not driven purely by the overall data. The real catalyst is positioning,” said Markus Thielen, founder of 10x Research.
According to his data, hedge funds built sizable bearish exposure on the report. Thielen added that this setup points to a “high probability of a short squeeze rather than a fundamental re-rating.”
He estimated that hedge funds lost about $500 million in one day from short bets as the stock price moved higher.
Business is tough
While Circle’s report produced positive overall numbers, digging deeper into the data revealed that the profitability of the business has declined despite growing demand for stablecoins.
Harvey Li, founder of Tokenization Insight, pointed out in a report that from a fundamental perspective, the circulation of Circle’s flagship USDC stablecoin increased to US$75.3 billion, a year-on-year increase of 72%, exceeding the growth of competitor Tether’s USDT.
As benchmark interest rates have compressed over the past year, revenue from reserves (mainly U.S. government debt backing USDC) has grown 58% to $2.64 billion. But distribution costs climbed faster, rising 66% to $1.66 billion, highlighting the cost of incentivizing partners and platforms to expand adoption.
Lee noted that Circle’s net profit slumped from $156 million in 2024 to a loss of $70 million despite a surge in issuance.
“Stablecoins may be expanding; stablecoin issuance is a difficult task,” Li said.
Exceeded expectations
Still, Circle beat analysts’ forecasts.
After a stronger-than-expected fourth quarter, Japanese investment bank Mizuho raised its price target on Circle to $90 from $77, citing a boost from prediction markets and growing optimism about “agent commerce,” in which autonomous artificial intelligence agents trade using Circle’s USDC stablecoin.
The firm reiterated its neutral rating on the stock, warning that lower interest rates could still 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 forecasting and betting platforms, particularly Polymarket, as important drivers of recent USDC growth, citing its high-frequency trade flows and near-term utility.
Analysts noted that company executives also highlighted USDC’s emerging role in agent commerce, describing the stablecoin as a potential default currency for artificial intelligence agents trading on digital markets. An increasing number of products are being built on USDC and connected to Circle’s network, with trading and prediction platforms being prominent examples of high-speed use cases.
The bank currently forecasts that average USDC circulation in 2027 will be approximately $123 million, with reserve revenue for that year of approximately $3.7 billion and EBITDA of $916 million, assuming interest rate cuts are in line with consensus expectations. Using a 24x EBITDA multiple (a premium to peers such as Visa (V), Mastercard (MA), Coinbase (COIN), and Robinhood (HOOD)), analysts arrive at a new $90 price target.