Circle shares rose nearly 5% on 4 Aug, recovering from a drop a day earlier triggered by a Morgan Stanley downgrade, as investors weighed a mixed outlook ahead of the stablecoin company's second-quarter earnings.
Circle Rebounds Ahead of Earnings as Investors Weigh Stablecoin Outlook
4 August 2026 - 22:11 UTC
By Jona Jaupi
The stock ended the day 5% higher at $63.25, recovering ground after sliding around 8% the day before when Morgan Stanley downgraded Circle to underweight from equal-weight and cut its price target to $38 from $106.
Investors are now looking to Circle's second-quarter earnings, due before market open on 5 Aug, for signs that its stablecoin business can maintain growth amid mounting competition and that newer products can become real sources of revenue.
Analysts expect the Circle to report earnings per share of about $0.16 to $0.19.
Wall Street turns cautious
Morgan Stanley lowered its forecasts for the amount of USDC in circulation in 2027 and 2028 by about 33% and 44%, respectively, leading it to reduce its earnings estimates.
USDC is Circle's dollar-backed stablecoin, a digital asset designed to maintain the same value as the US dollar. USDC is currently the world's second-largest circulating stablecoin with a market capitalization of more than $72bn and a largely flat market share of about 24%, according to DeFiLlama, compared with 61% for Tether's USDT.
Circle makes much of its money from the interest earned on the reserves backing USDC. As of 3 Aug, USDC in circulation is backed by around $72.2bn in reserves, most of which are held in overnight reverse repurchase agreements and short-term US Treasury securities, according to the company.
However, as competition grows, analysts say that business could become harder to maintain. Potential competitors include tokenized money market funds (MMFs), tokenized bank deposits and newer stablecoins, such as Open USD (OUSD), are giving users and businesses more ways to move funds on blockchain networks.
European counterweight
Lower crypto trading activity may add to those concerns. Coinbase, one of Circle's key distribution partners, recently reported weaker-than-expected financial results after spot trading volume fell 35% from a year earlier to $146.4bn and transaction revenue declined 22% to $599mn.
The slowdown suggests that softer crypto-market activity is weighing not only on exchanges but also on the wider ecosystem supporting stablecoin usage. Coinbase posted revenue of $1.22bn, below analysts' $1.29bn estimate, as reduced activity among consumer and institutional customers pressured its core business.
Europe may provide Circle with a partial offset to weaker trading activity elsewhere. Speaking during a Keyrock webinar on local stablecoins, Amir Hajian, Keyrock's head of research, said exchanges complying with the Markets in Crypto-Assets Regulation had shifted flows from Tether's USDT towards compliant dollar-backed alternatives like Circle's USDC.
Circle's euro-backed EURC stablecoin is also gaining traction. Filippo Armani, a data analyst at Dune, said EURC accounted for about 90% of decentralized-exchange trading in non-dollar stablecoins in June. He also said the token was seeing increasing acceptance as collateral in decentralized finance.
Investors are now looking to Circle's second quarter earnings for updates on USDC growth, revenue and guidance, as well as signs that the company's payment businesses are advancing.
