Circle Internet Group (NASDAQ: CRCL) faces mounting pressure as slower-than-expected growth of its USD Coin (USDC) stablecoin and escalating distribution costs threaten profitability, despite reporting a 90% year-over-year surge in USDC circulation to $61.3 billion and a 53% revenue increase to $658 million. Mizuho Securities analysts highlight a concerning gap between Circle's projected 40% compound annual growth rate for USDC and its actual 6% quarterly expansion, raising doubts about long-term targets.
Distribution expenses have climbed sharply from 39% of the reserve pool in 2022 to 64% in Q2 2024, squeezing margins. Heightened competition looms with the GENIUS Act enabling more institutional stablecoin issuers, and Tether's planned U.S. return intensifying market pressure. Critically, Circle's revenue model faces existential risk from potential Federal Reserve rate cuts. Recent CPI data showing 2.7% July inflation has fueled expectations of monetary easing, with Dragonfly investor Omar warning that a 100-basis-point cut could slash $618 million (23%) from revenue and reduce gross profit by $303 million (30%) from the projected $1.005 billion year-end total.
Mizuho's bear case scenario—assuming 15% USDC growth and lower rates—projects Circle's stock could plummet to $40/share, versus their $84 target based on a 23x EBITDA multiple. While Circle raised $1.5 billion in an August 13 share sale to fund new initiatives like the Circle Payment Network and Arc blockchain, analysts note offsetting revenue declines would require a 44% ($28 billion) expansion of USDC's current $64 billion supply—a challenge amid regulatory hurdles.
