After a remarkable debut on the Nasdaq earlier this year, Circle (CRCL), the issuer of the USDC stablecoin, has experienced a considerable drop in its share price. Following a high of $298 on June 23, merely 18 days post-launch, shares have now fallen by 68%, trading around $82.
Circle Confronts Obstacles As Lockup Period Nears
Although benefiting from a more lenient regulatory approach toward digital assets in the US due to President Trump’s cryptocurrency measures, Circle confronts difficulties that historical trends do not support, especially as it draws closer to the end of its lockup period.
Experts, including Dan Dolev from Mizuho, pointed out that this lockup period restricts insiders from liquidating shares, typically for 180 days following an initial public offering.
Circle’s IPO documentation indicated that this lockup period will terminate two days after the company reveals its third-quarter earnings, which is this Friday.
Mizuho’s review of over 750 IPOs with market capitalizations above $1 billion indicates that 58% of firms that outperform the S&P 500 before their lockup period tend to lag behind the index in the subsequent 180 days. These firms see an average drop of roughly 2%.
The forecast is even more pessimistic for companies that fall short of revenue expectations in the year following their IPOs, which typically face an average negative return of about 10% compared to the S&P 500.
According to Mizuho, Circle might align with this latter group. A substantial part of the company’s earnings stems from the interest on USDC reserves kept in short-term US Treasuries, Treasury repurchase agreements, and liquid assets.
Thus, a reduction in interest rates or slower-than-expected growth of USDC could negatively affect revenue streams. Dolev remarked:
In our assessment, CRCL is likely to encounter downward revisions to consensus projections in the upcoming years amid declining rates and less impressive expansion of its USDC stablecoin, in addition to rising distribution expenses.
Is CRCL A Buy-Low Prospect?
Regardless of these potential downward revisions, Circle recently surpassed consensus projections for both revenue and earnings in its third-quarter report.
Following the announcement, JP Morgan provided a double-upgrade for the stock from Underweight to Overweight, increasing its price target from $94 to $100. The bank emphasized the continued acceptance of stablecoins within mainstream financial entities, with USDC being a prominent player in this arena.
However, the forthcoming expiration of the lockup has already exerted downward pressure on Circle’s shares, according to JP Morgan analyst Kenneth Worthington.
He perceives the ongoing situation as a “buy-low opportunity” for investors, suggesting that the stock’s decline after lockup may have pushed it to levels below its December 2026 price target, pointing to potential for future growth.
Featured image from DALL-E, chart from TradingView.com
