Circle Internet Group shares fell sharply in premarket trading on Monday after Morgan Stanley downgraded the stablecoin issuer, while TD Cowen initiated coverage with a bullish stance—fueling a fresh divide among analysts on the company’s long-term growth outlook. Circle stock was down 6% to $58.81 ahead of the open.
The split came as investors weighed projections for USDC growth against competing views that Circle can expand beyond stablecoin issuance into a broader financial infrastructure platform. Bitcoin also eased, trading 0.64% lower over the prior 24 hours at $62,625.
Key takeaways
- Price move: Circle shares slid 6% in premarket trading to $58.81.
- Catalyst: Morgan Stanley cut its rating to Underweight and lowered its USDC growth forecasts, while TD Cowen began with a Buy rating.
- What it means: The debate centers on whether USDC adoption will accelerate enough to sustain Circle’s reserve-income model.
- Broader implication: Investors are also monitoring regulatory uncertainty, including the proposed Clarity Act.
What drove the move
Morgan Stanley’s downgrade pointed to expectations that the circulation of USDC—Circle’s dollar-pegged stablecoin—will expand more slowly than previously forecast. The firm reduced its USDC circulation estimates for 2027 and 2028 by 33% and 44%, respectively, arguing that Circle’s plan for average annual growth of 40% across market cycles faces a tougher reality.
In its assessment, Morgan Stanley suggested that USDC has not shown meaningful growth momentum since the third quarter of last year, adding that broader adoption has not yet materialized in ways that would translate into sustained usage. The brokerage said “utility beyond remittances and stablecoin-linked card spending” has yet to gain meaningful traction.
While Morgan Stanley acknowledged that major payments firms—including Mastercard and Stripe—have increasingly embraced stablecoin technology, it argued that practical adoption remains limited. Drawing on McKinsey data, the firm cited stablecoin transaction volume of about $35 trillion in 2025, but estimated that only around $390 billion could be identified as real-world payments.
The implication for Circle’s economics was central to the downgrade. Morgan Stanley’s analyst James Faucette wrote that stablecoin activity remains “overwhelmingly skewed” toward crypto trading and transfer activity rather than payments. He added that while there are growing use cases in cross-border B2B and consumer remittances—including stablecoin-linked card spending—that generate transaction velocity, they have not yet demonstrated the ability to create “durable balances or recurring transaction economics” needed to offset pressure on Circle’s reserve-income model.
TD Cowen’s counterpoint: a platform bet
TD Cowen took the opposite approach, launching coverage with a Buy rating and an $82 price target. The firm said it sees a “compelling combination” of growth and diversification through USDC circulation, alongside rapidly rising high-margin fee-based revenues and “Arc optionality.” TD Cowen also argued the market may be underestimating Circle’s potential evolution into a platform player.
Analyst Bryan Bergin described Circle’s business as moving beyond stablecoin issuance toward wider financial infrastructure capabilities. That includes payments, treasury services, tokenized real-world assets, interoperability, and developer services—elements that, if scaled, could broaden revenue streams beyond the reserve-income model.
In Bergin’s view, Circle offers exposure to the institutionalization of stablecoins and the modernization of global financial infrastructure, framing the long-term opportunity around Circle’s ability to monetize additional layers of the stablecoin ecosystem.
Analysts remain split as 2026 performance lags
Despite a broader market backdrop, Circle shares have struggled through 2026. The stock is down 21% year to date, compared with a 9.4% gain for the broader market, while Bitcoin has declined 28% over the same period. The ongoing weakness has left investors focused on whether stablecoin adoption will translate into durable economics for issuers.
Another pressure point is policy uncertainty. Circle has faced concerns tied to the proposed Clarity Act, legislation intended to establish a regulatory framework for the cryptocurrency industry. While investors may view regulatory clarity as a potential tailwind, the timing and final shape of such rules remain uncertain.
LSEG data shows the sell-side debate is closely balanced. Of 30 analysts covering Circle, 16 rate the stock Hold or Sell, while 14 recommend Buy or Strong Buy. The split reflects differing expectations for the pace of stablecoin adoption, the growth trajectory for USDC circulation, and Circle’s ability to expand into a broader financial infrastructure platform as regulatory conditions continue to develop.
What to watch next
Investors will likely track updates on USDC growth trends and any concrete signs of broader payment adoption beyond remittances and stablecoin-linked card usage. With regulation still a key overhang, the market will also be watching progress related to the proposed Clarity Act and how that could affect stablecoin activity and Circle’s long-term revenue mix.
