Already on a tear ahead of the war in Iran, Circle (CRCL) may be an unlikely beneficiary of the conflict.
The stock rose 10% on Monday, outperforming other crypto-linked stocks, with shares now up 86% over the past month, though they remain markedly lower since their peak post-IPO frenzy last summer.
Japanese bank Mizuho said part of the Circle rally reflects the jump in oil prices following the escalation in Middle East tensions. Higher crude oil prices could reignite inflationary pressures, potentially reducing expectations for Federal Reserve interest rate cuts.
Indeed, oil prices have rallied since hostilities broke out in the Gulf, with WTI crude up about 35% since February 28. Higher energy prices tend to boost inflation and can limit the ability of central banks to lower interest rates.
Positioning certainly played a role as well.
While the company reported solid growth in USDC supply in its fourth-quarter earnings, analysts say the magnitude of the move likely reflected crowded short trading ahead of the release.
“The size of the move wasn’t all about the headlines. Positioning was the real catalyst,” said Markus Thielen, founder of 10x Research.
According to his data, hedge funds had accumulated significant bearish bets ahead of the report. 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 float, equivalent to about two days of cover, according to FactSet data.
Read more: Circle moves $68 million in just 30 minutes using its own stablecoin for internal payments
