Circle shares slide after Morgan Stanley downgrade on stablecoin growth concerns

InstantWhy

What happened

CoinDesk reports that Circle Internet shares fell after Morgan Stanley downgraded the stock and lowered its price target. The bank pointed to slower growth in Circle's USDC stablecoin, competition from tokenized money market funds, and the Open USD initiative as factors that could weigh on future earnings. The new rating and specific price target were not disclosed in the available reporting.

Why it matters

USDC is the second-largest stablecoin and Circle's core revenue driver, so any slowdown in adoption or market share loss directly hits the company's earnings power. The downgrade suggests Wall Street is questioning whether the stablecoin business model can sustain premium valuations as the tokenized asset landscape fragments.

Context & history

This is the second time in recent months that Morgan Stanley has downgraded Circle, having previously cut its rating in early August. That earlier downgrade also triggered a selloff in the stock. Wall Street analysts have issued conflicting views on the stablecoin issuer, with TD Cowen initiating coverage at Buy on the same day as Morgan Stanley's August downgrade. The divergence reflects uncertainty about how to value a company whose product—dollar-pegged tokens—faces both regulatory tailwinds and new competition from traditional finance entering the tokenization space.

What’s next

Investors will watch whether Circle discloses USDC circulation figures that confirm or refute Morgan Stanley's growth concerns. The company has not commented on the downgrade. Competitive pressure from tokenized funds and rival stablecoins will likely remain a focus for analysts covering the stock, particularly as regulations around stablecoin issuance take shape.

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