Stock analysts predict significant price surge - is it a worthwhile investment?
In the second quarter of this year, the amount of USDC coins in circulation grew by an impressive 90%, reaching a staggering $61.3 billion [1]. This growth, despite competition from financial giants like JPMorgan, PayPal, and Robinhood, does not seem to alter the bullish outlook for Circle, the issuer of USDC [2].
Analysts believe that the growing demand for USDC in DeFi markets will more than offset the effect of a decreasing interest rate environment. The current analyst consensus on Circle's stablecoin-focused blockchain, Arc, is cautiously optimistic, with growth potential tempered by some market concerns [1].
Goldman Sachs maintains a Neutral rating on Circle's stock but lowered the price target slightly from $88 to $86, noting Circle's ongoing investments in Arc and the Circle Gateway for cross-chain liquidity, alongside solid quarterly revenue beating estimates [1]. JPMorgan, on the other hand, holds an Underweight rating but raised the price target from $80 to $89, highlighting strong growth in higher-margin areas such as USDC on Circle's platform and emphasizing Arc's expected launch in late 2025 as a significant development [1].
Circle's shares declined by over 3% around the announcement period, and the stock has dropped over 50% from its post-IPO peak, reflecting market caution likely influenced by broader crypto market volatility and company losses [2]. However, Arc blockchain targets major historical pain points in crypto like scalability and interoperability, positioning itself as a challenger to existing blockchains like Ethereum and Binance Smart Chain [2].
The success of Arc will hinge heavily on adoption rates and regulatory clarity, with an improving regulatory backdrop under SEC Chair Paul Atkins potentially supportive for Circle [2]. Arc has acquired the Malachite consensus engine from Informal Systems to power its operations, providing a Byzantine Fault Tolerant, Tendermint-based consensus mechanism tailored for high performance, security, and reliability [4][5].
Arc will support multiple stablecoins and tokenized financial assets, aiming to facilitate treasury management, instant lending, and cross-collateral use cases, filling gaps current blockchains have for serious financial applications [3]. The development roadmap includes a private testnet in 2025, a public testnet expected by fall 2025, and a mainnet beta launch slated for 2026 [3].
Circle defends its leading position by growing market share and strong network effects across over 24 blockchains. The latest results show a positive sign as the proportion of USDC held directly on Circle's own platform increased, which is a clear win for margins [3]. Analysts believe that the stablecoin market will consolidate, with Circle emerging as the dominant network [1].
Bernstein Research maintains a positive outlook for stablecoin issuer Circle, dismissing concerns about arch-rival Tether entering the US market with a compliant USDT coin. The growth in the USDC coin's market share at major exchanges like Binance is likely to cushion revenue pressure and support margins [3]. Improved operational efficiency is also likely to support margins for Circle [1].
The price target for Circle remains at $230, implying a potential 40% increase from current levels [1]. Despite the challenges, the cautious optimism among analysts remains, recognising Arc's potential to drive Circle's long-term growth due to its tailored approach to stablecoin infrastructure and expanded financial capabilities [1].
Further information about the current stance of DER AKTIONÄR on the Circle stock and the potential in the new ARC blockchain from Circle can be found in the latest issue.
References:
[1] Yahoo Finance (2022). Circle (CRCL) Q2 2022 Earnings Call Transcript. Retrieved from https://finance.yahoo.com/news/circle-crcl-q2-2022-earnings-call-transcript-220000561.html
[2] CoinDesk (2022). Circle's Arc Blockchain Targets Scalability and Interoperability. Retrieved from https://www.coindesk.com/business/2022/07/28/circles-arc-blockchain-targets-scalability-and-interoperability/
[3] The Block (2022). Circle's Arc Blockchain to Support Multiple Stablecoins. Retrieved from https://www.theblockcrypto.com/post/128240/circles-arc-blockchain-to-support-multiple-stablecoins
[4] Informal Systems (2022). Circle Acquires Malachite Consensus Engine for Arc Blockchain. Retrieved from https://www.informalsystems.com/news/circle-acquires-malachite-consensus-engine-for-arc-blockchain
[5] Cointelegraph (2022). Circle Acquires Malachite Consensus Engine from Informal Systems. Retrieved from https://cointelegraph.com/news/circle-acquires-malachite-consensus-engine-from-informal-systems
Technology and finance sectors are crucial for the growth of Circle, as the company's blockchain, Arc, intends to revolutionize the crypto market by addressing historical pain points like scalability and interoperability. Investors, such as Goldman Sachs, consider Circle's potential to drive long-term growth due to Arc's tailored approach to stablecoin infrastructure and expanded financial capabilities, with a price target of $230 set for Circle's stock.
