Circle (CRCL), issuer of the USDC stablecoin, continues to surge, now up 45% in less than two sessions following its fourth-quarter earnings report on Wednesday.
The move broke what had been a brutal 80% drop from record levels reached last year.
While the company achieved strong growth in USDC supply, the huge stock reaction was driven more by crowded short bets being published than by strong financial statements, analysts suggested.
“The magnitude of the move was not driven solely by headline numbers. The real catalyst was positioning,” said Markus Thielen, founder of 10x Research.
According to their data, hedge funds had generated considerable bearish exposure to the report. That setup pointed to a “high probability of short squeeze rather than a fundamental rerating,” Thielen added.
He estimated that hedge funds had lost about $500 million in a single day on short positions as stocks rose.
Difficult business
While Circle’s report produced positive headline numbers, digging deeper into the data shows that business profitability declined despite growing demand for stablecoins.
Looking at fundamentals, Circle’s flagship USDC stablecoin grew to $75.3 billion in circulation, up 72% year-over-year and outpacing the growth of rival Tether’s USDT, Harvey Li, founder of Tokenization Insight, noted in a report.
Income from reserve inflows (mainly US government debt backing USDC) rose 58% to $2.64 billion as benchmark interest rates compressed over the past year. But distribution costs rose even faster, up 66% to $1.66 billion, underscoring the expense of incentivizing partners and platforms to expand adoption.
Despite the increase in circulation, Circle swung from a net profit of $156 million in 2024 to a loss of $70 million, Li said.
“Stablecoins may be scaling; issuance of stablecoins is a difficult business,” Li said.
Exceeding 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 momentum from prediction markets and growing optimism around “agent trading,” in which autonomous AI agents make transactions using Circle’s USDC stablecoin.
The company reiterated its neutral rating on the stock, warning that lower interest rates could still hit reserve income.
Analysts Dan Dolev and Alexander Jenkins said Circle’s results beat expectations on both revenue and profits, easing investor concerns after a period of gloom. Management highlighted prediction and betting platforms, particularly Polymarket, as important drivers of USDC’s recent growth, pointing to 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 possible default currency for AI agents transacting in digital markets. An increasing number of products are being built on USDC and connected to the Circle network, with trading and prediction platforms serving as leading examples of high-speed use cases.
The bank now forecasts average USDC in circulation of about $123 million in 2027, modeling a reserve inflow of about $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 such as Visa (V), Mastercard (MA), Coinbase (COIN) and Robinhood (HOOD), the analysts arrived at their new price target of $90.
