Circle’s Bearish Analyst Raises CRCL Stock Rating

Compass Point’s Ed Engel, known for his bearish stance on Circle, upgraded the stock to Neutral, citing high volatility from its crypto market connections.

Circle’s stock upgrade hints at risk repricing but underscores ongoing volatility concerns with USDC’s correlation to ETH and DeFi exposure affecting market reactions.

Compass Point analyst Ed Engel, previously one of Circle’s strongest critics, upgraded Circle’s stock (CRCL) from Sell to Neutral. The upgrade reflects a reassessment of the company’s valuation risks and market volatility.

Ed Engel cited Circle’s significant exposure to the crypto market, particularly through its stablecoin USDC, as a reason for continued caution. USDC’s 0.66 correlation with ETH and 75% involvement in DeFi pose ongoing risks.

Market Response and Implications

Following the upgrade, Circle’s stock experienced a mixed market response. It closed at $67.55 with a 7.3% intraday drop but saw a slight post-market recovery, indicating investor uncertainty amidst the upgrade news.

Financial implications for Circle are tied to macro trends affecting cryptocurrencies like ETH and SOL. The company’s reliance on DeFi may result in continued price volatility due to external market conditions.

Impact of Regulatory Changes

The upgrade indicates potential shifts in market perception, yet Circle’s exposure to DeFi remains critical. Regulatory trends, such as the CLARITY Act, may influence stablecoin stability if successfully passed.

A historical context shows parallels with BTC’s previous market adjustments, impacting similar digital assets. “His upgrade signals a shift after market repricing of risks,” said Engel, indicating that regulatory changes could stabilize Circle’s cryptocurrency market, potentially impacting business strategy and financial health.