Circle Internet Group Inc (NYSE: CRCL) has been in a sharp uptrend ever since its debut on June 5th – but there’s reason to believe the massive surge in this crypto stock in recent weeks has gotten ahead of itself.
The company’s share price hinges primarily on the success of its stablecoin, USDC, which, at the time of writing, commands a valuation of well over $60 billion.
However, the USDC adoption rate, especially when compared to the space leader – Tether – hasn’t particularly been inspiring since its inception, pronouncing significant risks tied to owning Circle stock at current levels.
USDC overvaluation poses a risk to Circle stock
CRCL shares have attracted massive interest in recent weeks, mostly because the US Senate voted in favour of a landmark bill that sets stablecoins up for mainstream adoption.
However, investors should note that USDC’s current market cap looks disproportionately elevated relative to its adoption.
Circle touts transparency and regulatory compliance, but its stablecoin is not nearly as integrated into the global crypto infrastructure as Tether.
According to Protos, aggressive reserve strategy and broader risk appetite enabled Tether to record $13 billion in profits last year, compared to Circle’s rather modest $156 million only.
In percentage terms, that translates to an 8,000% gap in profits, indicating USDC’s market cap at about $62 billion versus over $160 billion for Tether may be a bit too overvalued.
Why else are CRCL shares unattractive at current levels?
What’s also noteworthy is that USDC’s growth has been meaningfully propped up by institutional backing.
BlackRock manages 90% of its reserves, and it was reported prior to the company’s IPO that the world’s largest asset manager planned on taking a 10% stake in the CRCL offering.
This institutional alignment is a double-edged sword: it lends credibility but also concentrates risk.
If sentiment shifts or regulatory winds change, USDC could face a sharp contraction.
Additionally, the Federal Reserve recently signalled two rate cuts for the back half of 2025, which will likely prove a headwind for Circle’s stock price, given the firm’s financials are strongly tied to interest rates.
Walmart/Amazon could hurt Circle stock in 2025
In short, Circle needs its stablecoin (USDC) to see incredible adoption rates globally to justify an unparalleled 250% increase in its stock price in less than three weeks.
However, giants like Amazon and Walmart Inc have already signalled plans of launching their own stablecoins, which could significantly hurt the prospects for USDC moving forward.
And if its adoption doesn’t scale to match its valuation, USDC could face redemption pressure in a market downturn, which could lead to a sharp decline in CRCL share price in the second half of this year.
That’s perhaps why famed investor Cathie Wood recently trimmed her exposure to Circle stock as well.
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