{
  "type": "article",
  "title": "Shrinking Stablecoin Supply Triggers a Brutal $38 Target Cut on Circle Stock",
  "summary": "Morgan Stanley slashed Circle's price target to $38 from $106 and cut its rating to underweight, warning that slowing USDC growth threatens the reserve income at the core of its revenue, even as TD Cowen started coverage with a bullish $82 target.",
  "content": "Circle's stock came under heavy selling pressure on Monday after Morgan Stanley took a decidedly cautious view on the company that issues the USDC stablecoin, cutting its price target all the way to $38 from $106 and lowering its rating to underweight. The sharp reversal piled onto an already difficult stretch for the shares, which have spent much of the year in the red.\n\nWhy the reserve model is the sticking point\nAt the heart of the downgrade is a question about how Circle actually makes its money. A large share of the company's revenue comes from the income it earns on the reserves that back USDC. Because every coin in circulation is supported by those reserves, the size of USDC's circulating supply is tied directly to how much the business can earn. When fewer coins are outstanding, the reserve pool is smaller and the interest it throws off shrinks with it.\n\nThat is exactly the pressure point analyst James Faucette highlighted. He noted that growth in USDC's circulating supply has been weaker than expected, and that softness could weigh on the reserve income the company depends on as a key source of revenue. The firm also questioned whether the stablecoin has found enough genuine demand to drive its next phase of growth. \"Utility beyond remittances and stablecoin-linked card spending has yet to gain meaningful traction,\" the bank said, describing a business still anchored to a fairly narrow set of use cases.\n\nThe math behind the steep cut\nMorgan Stanley did not simply shade its assumptions, it cut them hard. The bank reduced its forecast for USDC supply by 33% for 2027 and by 44% for 2028 against its earlier estimates. Those downward revisions flow straight into its profit outlook: the bank now expects Circle's GAAP earnings per share to come in roughly 3% below the Wall Street consensus for 2027 and a far steeper 20% below consensus for 2028.\n\nFaucette laid out the logic in plain terms. \"We downgrade Circle, as USDC contraction exposes reserve income sensitivity and points to a lower-margin shift toward transaction revenue,\" he wrote. The warning is that as the stablecoin's supply contracts, Circle may have to rely more on lower-margin transaction fees rather than the richer, interest-driven reserve income that has powered its earnings so far.\n\nCompetition is closing in\nBeyond the growth math, the bank sees the competitive field tightening around USDC. Tokenized money market funds and tokenized bank deposits are steadily gaining ground as alternative ways for investors and institutions to hold digital versions of traditional financial assets, giving large pools of capital more choices than a stablecoin alone.\n\nBlackRock's move to expand its blockchain-based money market products underscores how much capital is now competing inside the tokenized finance market. On top of that, newer stablecoin designs, including Open USD, could raise the cost of maintaining the distribution incentives that keep USDC widely used. The caution is not unique to one bank either: JPMorgan is among the firms that have already flagged the intensifying competition running through the stablecoin market.\n\nNot everyone is bearish\nThe pessimism, however, is far from universal. On the very same Monday, TD Cowen began covering Circle with a buy rating and an $82 price target, more than double Morgan Stanley's new figure. Its thesis runs almost opposite to the bearish case. TD Cowen argued that the market may be placing too much weight on Circle's reserve income while overlooking the potential for growth in areas such as payments, treasury services, tokenized assets, and developer tools, businesses that do not depend on interest rates or coin supply in the same way.\n\nWhere the stock stands\nFor the day at least, investors leaned toward caution. Circle shares (CRCL) fell more than 3% after Morgan Stanley's downgrade, pushing the stock's decline for the year to 24%. The gulf between a $38 target and an $82 target captures the larger argument now hanging over the company: whether USDC's slowdown signals a genuine weakness at the center of Circle's business, or an overreaction that ignores the other lines the company is trying to build.\n\nWhat this means for you\n• For Circle investors: The stock is already down 24% this year and slid more than 3% on the downgrade, and analyst targets now range widely from $38 to $82, so expect continued volatility.\n• For crypto and stablecoin users: Rising competition from tokenized funds, bank deposits and new models like Open USD could reshape which digital dollars end up dominating.\n\nQuestions & Answers\n\n1. What is Morgan Stanley's new price target for Circle?\nThe bank cut Circle's target to $38 from $106 and lowered its rating to underweight.\n\n2. Why was the target cut so sharply?\nThe main reasons are weaker-than-expected USDC growth and concerns over the reserve income model, since reserve earnings are a key source of the company's revenue.\n\n3. How much did the USDC supply forecast come down?\nThe bank cut its USDC supply forecast by 33% for 2027 and by 44% for 2028 versus its earlier estimates.\n\n4. How far below Wall Street are the earnings estimates?\nMorgan Stanley's GAAP earnings-per-share estimates are now roughly 3% below consensus for 2027 and 20% below for 2028.\n\n5. Are all analysts bearish on Circle?\nNo. TD Cowen started coverage the same Monday with a buy rating and an $82 price target.\n\n6. How much did Circle's stock fall after the downgrade?\nCircle shares fell more than 3%, pushing the stock's decline for the year to 24%.\n\n7. Where is the competition to USDC coming from?\nFrom tokenized money market funds, tokenized bank deposits, BlackRock's blockchain products and newer models like Open USD, and firms such as JPMorgan have also flagged the rising competition.",
  "url": "https://trendkia.com/en/crypto/stebalakoina-ki-ghatati-saplai-ne-circle-para-giraya-tarageta-106-se-sidhe-38-para-pahuncha-bhava-13412",
  "category": "Crypto",
  "publishedAt": "2026-08-04",
  "tags": [
    "Circle",
    "USDC",
    "Morgan Stanley",
    "stablecoin",
    "TD Cowen",
    "CRCL",
    "crypto"
  ],
  "language": "en",
  "site": "TrendKia"
}