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Key Insights:
- Dragonfly investor Omar projects a 100 bps rate cut could slash Circle Stock annual revenue by 23%, and gross profit by 30%.
- To offset this, USDC supply would need to grow by $28 billion, which is 44% of the current circulating supply.
- Circle is introducing transaction-based models like the Cross-Chain Transfer Protocol and Circle Chain to counter declining yield income.
Shares of USDC stablecoin issuer Circle (NASDAQ: CRCL) have once again come under strong selling pressure today. The Circle stock has corrected 6% in the last 24 hours, amid plans of a secondary stock offering and Fed rate cuts. With a 25% correction over the past month, investors are wondering what happens next.
Circle Stock on Radar Amid Fed Rate Cuts
With Donald Trump demanding over 300bps Fed rate cut, market analysts believe that this could hurt Circle’s revenue, moving ahead. Dragonfly investor Omar has projected that a 100 basis point interest rate cut could significantly affect Circle’s financial performance.
He said that a Fed rate cut would drop the company’s annual revenue by 23% $618 million. Omar also added that the gross profit could drop 30% by $303 million, while compressing margins by 3.3%. As a result, the valuation multiple could shoot from 42x EV/annualized gross profit to 60.4x, surging by nearly 50%.
In order to offset the revenue loss, USDC supply would need to grow by $28 billion. This is equal to 44% of its current $64 billion circulation. Omar noted that rate cuts are inevitable, amid Circle’s recent $1.5 billion share sale, and its push to launch transaction monetization products such as Cross-Chain Transfer Protocol (CPN) and Circle Chain.
These initiatives aim to reduce reliance on yield income by shifting toward transaction fee-based models. On the other hand, Circle faces a mounting challenge to boost the USDC supply by 44% as the stablecoin market becomes very competitive. While supporters point to USDC’s strong presence in DeFi, critics warn of shrinking yields.
Following the highs of $250 last month, the Circle stock has corrected by 40% and is currently trading closer to $150. Earlier this week, the stock attempted a trend reversal after strong Q2 revenue of the firm, with Circle launching the Layer-1 Arc blockchain to expand its stablecoin reach. However, the rally quickly ended after the company announced a second stock offering.
Circle Stock Cracks on News of Secondary Offering
After announcing its Q2 results earlier this week, Circle filed with the U.S. Securities and Exchange Commission (SEC) to sell 10 million Class A Circle stock through a public offering. Of the total, the company will issue 2 million new shares, while existing stockholders plan to sell 8 million shares.
The offering also allows underwriters to purchase up to an additional 1.5 million shares within 30 days if demand exceeds expectations. Circle’s recent SEC filing officially greenlights its public share offering. It allows the company and selling stockholders to begin bringing shares to market.
Institutional investors would be dominating the buyer base, as second offerings would typically cater to professional money managers, instead of retail participants. The filing also includes a 30-day greenshoe option. This gives underwriters the flexibility to purchase additional shares if investor demand exceeds initial allocations.
Fed Rate Cut Chances Jump to Nearly 100%
Odds of a Federal Reserve rate cut in September have surged to 99.8%, effectively signaling the first policy reversal after years of tightening. Traders now see a 100% probability of a cut at the upcoming meeting.
This pivot to cheaper borrowing costs injects liquidity into markets, a bullish development for equities and cryptocurrencies. Market participants are also pricing in multiple rate cuts before year-end, a scenario that could further amplify liquidity and fuel momentum across risk assets.
