Circle’s shares bounced back Wednesday after a bruising two days of volatility tied to fresh stablecoin policy chatter on Capitol Hill and a headline-making audit notice from rival Tether.
What moved the market
- Circle stock pared losses to trade around $102.50, trimming a roughly 22% weekly drop, and spiked as high as $110 soon after Wednesday’s open, per Yahoo Finance. The slump began Tuesday after draft language in the Clarity Act — part of an ongoing push to regulate crypto — signaled that platforms like Coinbase could be barred from offering USDC holders “deposit‑like” rewards. That raised concerns about outflows and how stablecoins are monetized.
- The selloff was amplified the same day by Tether saying it’s working on a full audit with an unnamed Big Four firm, a move some analysts interpreted as a sign Tether may be preparing for deeper U.S. market activity for USDT — a potential competitive pressure on USDC.
Analysts: the selloff “overdone”
- Clear Street (led by Owen Lau) pushed back, calling the market reaction overdone. “Near‑term monetization expectations may need to be tempered, but the strategic demand case for USDC remains intact,” they wrote, keeping a Buy rating and a $152 target on Circle.
- They noted the Office of the Comptroller of the Currency has already proposed rules that would prohibit stablecoins from offering interest‑like payments, meaning the pure pass‑through yield model was “already under pressure” before the Clarity headlines.
Big investor buys the dip
- Ark Invest — Cathie Wood’s shop — appears to have agreed with that view. Ark’s funds picked up 161,000 Circle shares on Tuesday, and Ark’s allocation in Circle was about $16.5 million as of Wednesday, according to Ark Invest Tracker.
Regulatory and competitive context
- For Circle, positioning USDC as the more compliant alternative to Tether has been a core strategy. Clear Street argued that even if Tether tightens its audit practices, it’s “difficult to see investors ranking USDT above USDC on regulatory grounds.”
- Bernstein analysts also weighed in, clarifying a common misconception: Circle does not pay yield directly to USDC holders. The proposed yield ban targets platforms that distribute yield to end users, not issuers earning on reserves. Bernstein kept “Outperform” ratings on both Circle and Coinbase with price targets of $190 and $440 respectively.
What this means for Coinbase and the market
- Coinbase, which shares revenue from USDC reserves with users, has said restrictions on deposit‑like rewards could actually boost its profitability because it currently passes most reserve revenue back to customers. Still, the exchange’s stock slid about 10% on the week to roughly $181.
- Bernstein expects Coinbase to explore workarounds and navigate a transition to any new rewards regime rather than see adoption of USDC slow materially.
Bottom line
Short‑term monetization expectations for USDC may need recalibration, but major analysts and a high‑profile buyer are signaling that Circle’s regulatory positioning and institutional use cases — tokenization, AI‑native payments, prediction markets and adoption of regulated rails — leave the long‑term demand case intact.
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