The stock price of stablecoin issuer Circle (CRCL.US) has experienced a significant pullback less than three weeks after its IPO, with investor enthusiasm cooling rapidly. On Wednesday, Circle shares plunged 10.79% to $198.62, marking a cumulative two-day decline of 24.6%. Meanwhile, Coinbase (COIN.US) demonstrated strong momentum with consecutive gains totaling 15.5%, closing at $355.37—just 0.6% below its 2021 all-time high.
Market Experts Weigh In on Circle's Valuation
Peter Eberle, CIO of crypto investment firm Castle Funds, described Circle's correction as "unsurprising," noting its previous "overheated rally exceeded fundamentally justified levels."
Alexander Blume, CEO of Two Prime crypto hedge fund, observed that Circle's recent valuation appeared significantly inflated, stating:
"The market is undergoing rational price discovery. Coinbase's relative strength may reflect reevaluation of Circle's overpriced premium."
Regulatory Developments and Partnership News
Monday's brief price surge followed two key developments:
- Strategic Partnership: Collaboration with fintech giant Fiserv to develop stablecoin products
- Regulatory Progress: US Senate passing a stablecoin oversight bill signaling potential mainstream adoption for compliant tokens like USDC
The bill now awaits House vote—if enacted, it could accelerate dollar-pegged stablecoin adoption. Despite this positive outlook, investors opted for short-term profit-taking, triggering the sharp correction.
USDC Economics and Coinbase's Advantage
As a primary distributor of Circle's USDC stablecoin, Coinbase captures substantial revenue:
- 2024 Payments: $908M from Circle (53% of Circle's $1.7B annual revenue)
- Q1 2025 Share: $299M (again >50% of Circle's quarterly revenue)
While both firms stand to benefit from clearer stablecoin regulations, analysts highlight Coinbase's diversified potential. Benchmark's Mark Palmer notes:
"Coinbase gains disproportionate upside if the Digital Asset Market Structure Proposal passes under Trump's administration, resolving SEC/CFTC jurisdictional conflicts."
Market Performance and Outlook
Coinbase shares briefly hit a record $369.28 intraday Wednesday before settling at $355.37. Citizens analyst Devin Ryan maintains a $400 price target (+12.6% upside), citing:
- Multiple emerging billion-dollar revenue streams
- Undervaluation despite June's strong performance
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Frequently Asked Questions
Q: Why did Circle's stock drop so suddenly?
A: The correction reflects market reassessment of its valuation following an overheated IPO rally and profit-taking amid regulatory news.
Q: How does Coinbase benefit from USDC?
A: As primary distributor, Coinbase receives >50% of Circle's revenue through partnership agreements.
Q: What's the significance of the stablecoin bill?
A: It establishes regulatory clarity for dollar-pegged tokens, potentially accelerating institutional adoption if passed.