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Circle (CRCL), the issuer of the USDC stablecoin, has rallied 45% in less than two trading sessions following its fourth-quarter earnings report, sharply reversing an 80% decline from record highs reached last year. While the headline numbers showed solid growth, analysts say the dramatic spike in Circle stock was driven more by a powerful short squeeze than by a major shift in fundamentals.
According to Markus Thielen, founder of 10x Research, hedge funds had built significant bearish positions ahead of the earnings release. When results came in stronger than expected, short sellers were forced to cover, accelerating the rally. Thielen estimates hedge funds lost roughly $500 million in a single day as CRCL shares surged. He noted that the magnitude of the move reflected positioning dynamics rather than a pure fundamental re-rating.
Circle reported that USDC circulation climbed 72% year over year to $75.3 billion, outpacing growth in rival stablecoin USDT issued by Tether. Revenue from reserve income, primarily generated from U.S. government debt backing USDC, rose 58% to $2.64 billion. However, distribution costs increased even faster, jumping 66% to $1.66 billion, highlighting the high expense of driving stablecoin adoption through partners and platforms. Despite the expansion in USDC supply, Circle swung from a $156 million net profit in 2024 to a $70 million net loss.
Still, the company beat Wall Street expectations. Mizuho raised its price target on Circle stock to $90 from $77, maintaining a neutral rating while cautioning that lower interest rates could pressure reserve income. Analysts also pointed to growth from prediction markets like Polymarket and the emerging role of USDC in agentic commerce, where AI agents transact using stablecoins. Mizuho now projects USDC circulation to reach 123 million by 2027, with reserve income of $3.7 billion and EBITDA of $916 million, applying a 24x EBITDA multiple to justify its updated valuation target.
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