Circle Internet (CRCL) stock has experienced highly volatile trading sessions lately, dropping 7.6% on July 2. In contrast, shares are trending higher in pre-market trading at the time of writing. Circle stock had an extraordinary Initial Public Offering (IPO) run, surging more than 800% from its $31 listing price on June 5.
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Within a short span since its IPO, Circle stock skyrocketed to an all-time high of $298.99 on June 23, but it is currently trading more than 60% below its 52-week high.
Why Is Circle Stock Dropping?
Digital asset company Ripple Labs, closely related to the XRP cryptocurrency (XRP), announced yesterday that it has applied for a national U.S. bank license, similar to Circle. Investors reacted negatively to the news, dragging Circle stock down.
Meanwhile, Wall Street analysts are issuing varied ratings and price predictions on CRCL stock, ranging from a Street-High target of $250 to a low of $80. Top analysts from Needham, Citi (C), and Bernstein remain highly optimistic about Circle’s long-term stock outlook. In contrast, analysts from JPMorgan (JPM) and Goldman Sachs (GS) are more cautious, citing concerns about overvaluation.
Competition for Regulated Stablecoins Is Intensifying
Circle Internet applied for a national trust charter with the Office of the Comptroller of the Currency (OCC) on Tuesday, July 1. Circle is the issuer of USDC, the world’s second-largest stablecoin, which holds significant market share and continues to see growing institutional adoption.
If the OCC approves Circle’s application, the company will become eligible to act as a custodian for its own reserves as well as hold crypto assets for institutional clients. It would also solidify the issuance and circulation of USDC, being the world’s largest regulated payment stablecoin.
However, if Ripple Labs’ application for a national bank charter is approved, competition for Circle will significantly intensify. Ripple also issues a stablecoin, Ripple USD (RLUSD), which is regulated by the New York Department of Financial Services (NYDFS), and provides digital asset custody services. Establishing a national bank trust would give more transparency and compliance for Ripple’s stablecoin, which will likely accelerate institutional adoption in the stablecoin market.
Additionally, the bank charter would allow Ripple to expand its offerings beyond stablecoins to include broader crypto custody and banking services under federal regulation, further strengthening competition for Circle.
Despite the competition, Circle is expected to emerge as the winner in the regulated stablecoin market, since it holds several strategic advantages over Ripple. These include strong regulatory compliance, widespread market acceptance, and a significantly larger stablecoin market capitalization with USDC surpassing $60 billion compared to Ripple’s RLUSD at just over $300 million.
Is Circle a Good Investment?
On TipRanks, CRCL stock has a Hold consensus rating based on five Buys, five Holds, and two Sell ratings. Also, the average Circle Internet price target of $185.73 implies 4.4% upside potential from current levels.
