Circle’s biggest bear just threw in the towel, but warns the stock is still a crypto roller coaster

Core Viewpoint - Circle (CRCL), the issuer of the stablecoin USDC, has received a second upgrade from Wall Street analysts within a week, indicating a shift in sentiment towards the stock [1] Group 1: Analyst Upgrades and Price Target - Compass Point's Ed Engel upgraded Circle's stock from sell to Neutral, despite maintaining the lowest price target among analysts at $60, down from $75 due to premium valuation concerns [2] - Engel's upgrade reflects a changing narrative, suggesting that the stock now trades more like a proxy for crypto markets rather than as a standalone fintech [2] Group 2: Market Dynamics and Regulatory Outlook - Engel previously downgraded the stock in July due to increased competition for stablecoins, but believes many concerns have been priced in by the market [3] - The potential passage of the CLARITY Act in 2026, which Engel sees as having a 60% probability, could provide clearer regulatory guidelines for stablecoins, potentially supporting USDC's growth [3][4] Group 3: Cyclical Nature of the Stock - Engel views Circle as trading like a cyclical stock, with USDC moving in correlation with ether (ETH) at 0.66 since the market dip in October, a trend expected to continue through mid-2026 [5] - Over 75% of USDC is currently utilized in high-risk crypto trading or lending applications, linking its performance closely to the volatile crypto market [5][6] Group 4: Competitive Landscape and Risks - USDC's supply has decreased by 9% since December, with emerging stablecoins like USDH, CASH, and PYUSD gaining market share, particularly on platforms like Solana and Hyperliquid [7] - There are concerns that Circle may guide 2026 operating expenses above Wall Street forecasts, as ongoing investments are unlikely to yield significant revenue in the near term [7]