Shares of Circle (CRCL), the issuer of the USDC stablecoin, experienced an 18% decline on Tuesday following news of a competing stablecoin launch, Open USD (OUSD), backed by global partners including Coinbase, Visa, and Mastercard. However, analysts at Clear Street believe the market reaction was an overestimation by investors.
Market Overreaction Cited
“While OUSD boasts strong partners, similar to other leading stablecoins, the selloff appears overdone without concrete evidence of OUSD achieving significant market traction,” the analysts stated in a note released Wednesday.
Narrative Threat Lingers, But USDC’s Resilience Noted
Despite the impending launch of OUSD later this year, analysts acknowledge that the narrative threat may persist. Nevertheless, they point to Circle’s USDC stablecoin as having demonstrated staying power in the face of previous stablecoin introductions.
“Although the narrative may linger, CRCL has maintained robust market share despite the continuous emergence of new stablecoins,” the analysts wrote. “Our initial assessment suggests OUSD is comparable to USDG (Global Dollar Network stablecoin), which has not captured substantial market share.”
Circle CEO Highlights USDC’s Strengths
Circle CEO Jeremy Allaire offered perspective on the OUSD launch in response to investor inquiries, emphasizing his company’s strengths and the “massive scale” of the USDC network, a feature OUSD will lack at its inception.
According to Allaire, successful stablecoin networks require a broad spectrum of services and applications, substantial liquidity, and “deep integration with the policy and regulatory environment.”
“All of these investments by Circle and our global ecosystem of thousands of partners have culminated in providing the world’s most trusted and accessible digital dollar infrastructure,” he posted on X, adding that his firm has “no intention of slowing down.”
USDC’s Market Position
Currently, USDC holds the position of the second-largest stablecoin and ranks as the fifth-largest cryptocurrency overall, boasting a market capitalization exceeding $73 billion. Only Tether’s USDT, with a market cap of $184 billion, surpasses it in stablecoin rankings.
Share Performance and Outlook
Circle shares saw a partial recovery on Wednesday, gaining 3% to trade around $64.55. However, CRCL shares, which saw a significant surge upon their public debut last year, have fallen more than 18% in the past six months and are over 75% below their 52-week high of $262.97.
In their Wednesday note, Clear Street set a 12-month price target for Circle at $157, representing an approximate 140% increase from its trading price on Wednesday.
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