Circle ( CRCL ), issuer of the USDC stablecoin, continues to rise, now 45% higher in less than two sessions following its fourth-quarter earnings report on Wednesday.
The move snapped what had been a brutal 80% reduction from record hits last year.
While the company delivered strong growth in USDC supply, the stock’s outsized reaction was driven more by crowded short bets heading to print than by strong financials, analysts suggested.
“The size of the move was not driven solely by the headlines. The real catalyst was positioning,” said Markus Thielen, founder of 10x Research.
Hedge funds had built significant bearish exposure into the report, according to his data. That setup pointed to a “high-probability short squeeze rather than a fundamental re-rating,” Thielen added.
He estimated that hedge funds had lost about $500 million in a single day on shorts as stocks rose higher.
Tough business
While Circle’s report produced positive headlines, digging deeper into the data shows that the company’s profitability declined despite increasing demand for the stablecoin.
On the basics, Circle’s flagship USDC stablecoin grew to $75.3 billion in circulation, up 72% year-over-year and outpacing rival Tether’s USDT growth, Harvey Li, founder of Tokenization Insight, noted in a report.
Income from reserve income – primarily US government debt that backs the USDC – rose 58% to $2.64 billion as benchmark interest rates were squeezed over the past year. But distribution costs rose even faster, up 66% to $1.66 billion, underscoring the cost of incentivizing partners and platforms to expand adoption.
Despite increasing circulation, Circle swung from a net profit of $156 million in 2024 to a loss of $70 million, Li pointed out.
“Stablecoin can scale; issuing stablecoin is a tough business,” Li said.
Beat expectations
Still, Circle topped 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 “agentic trading,” where autonomous AI agents trade using Circle’s USDC stablecoin.
The firm reiterated its neutral rating on the stock and warned that lower interest rates could still weigh on reserve income.
Analysts Dan Dolev and Alexander Jenkins said Circle’s results beat expectations for both revenue and profit, easing investor concerns after a period of pessimism. Management highlighted prediction and betting platforms, particularly Polymarket, as significant drivers of recent USDC growth, pointing to their high-frequency transaction flows and short-term utility.
The analysts noted that company executives also emphasized USDC’s new role in agent trading, describing the stablecoin as a potential default currency for AI agents trading across digital marketplaces. An increasing number of products are being built on USDC and connected to Circle’s network, with trading and prediction platforms serving as prominent examples of high-speed usage.
The bank now forecasts average USDC in circulation of around 123 million in 2027, modeling reserve revenue of around $3.7 billion and EBITDA of $916 million that year, assuming rate cuts in line with consensus expectations. Applying a 24x EBITDA multiple, a premium to peers like Visa ( V ), Mastercard ( MA ), Coinbase ( COIN ) and Robinhood ( HOOD ), analysts arrived at their new $90 price target.
