Mizuho Securities downgraded Circle, the issuer of the USDC stablecoin, to 'underperform' from 'neutral' and cut its price target to $50 from $85. The downgrade, announced on Tuesday, reflects concerns over competitive pressure from Open USD, a newly launched stablecoin by the Open Standard consortium, which could impact Circle's revenue model. Analysts noted that Open USD's yield pass-through model may force Circle to share more reserve income with distribution partners, thereby compressing its margins.
Key Details
The Japanese investment bank also reduced its adjusted EBITDA forecast for Circle in 2027 to $699 million, approximately 25% below Wall Street consensus. Mizuho highlighted that an upcoming revenue-sharing renewal with Coinbase could further pressure Circle's financials. Circle's circulating supply of USDC has declined to around $73 billion, down from nearly $80 billion in March, amid increased competition and softer trading activity in the stablecoin market.
Background
In contrast, Open USD's model allows for a small operating fee while distributing most reserve income to issuers and distributors, which could fundamentally alter Circle's business dynamics. The consortium behind Open USD includes over 140 partners, such as Mastercard and BlackRock, indicating strong industry backing.
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The downgrade of Circle could lead to increased volatility in the stablecoin market, particularly affecting USDC and its competitors. Investors may reassess their positions in stablecoins as competition intensifies, potentially influencing trading volumes and liquidity in the crypto market.
Watch for Circle's response to Mizuho's downgrade and any developments regarding its revenue-sharing agreement with Coinbase, expected in the coming weeks.