Top 4 Risks that Could Crash the Circle Stock Price

Key Insights:

• Circle stock price has plunged by over 50% from its all-time high.
• Technical analysis points to more downside in the coming weeks.
• There is a likelihood that the Arc layer-1 network will not be successful.

Circle stock price has plummeted and moved into a bear market after plunging by 55% from its all-time high. CRCL was trading at $136, its lowest level since June 13. A closer look at its business shows that the stock will likely continue falling as its risks rise.

Circle Stock Price Has Technical Risks

The first main risk the Circle share price faces is its weak technicals. It has slumped from a high of $300 after its initial public offering to the current $136.

The stock has moved below the 50-period moving average, while the Supertrend indicator has turned red. Also, the Relative Strength Index (RSI) has continued falling.

Therefore, the most likely scenario is where the CRCL stock price continues falling as bears target the psychological point at $100.

Circle Arc Layer 1 Network Faces Competition Risk

One reason why the Circle stock price jumped after it published its results was that the management unveiled plans for Arc, a layer-1 blockchain focusing on stablecoins. The hope is that Arc can become a major competitor to other L1 networks like Ethereum and Sui.

The risk, however, is that it is unclear whether Arc will be successful because the crypto industry is already saturated with layer-1 and layer-2 chains that handle stablecoins well. Circle’s USDC stablecoin is already available in these chains.

Historically, many contenders in the layer-1 and layer-2 industry don’t do well because of the market share that Solana, Tron, Ethereum, and BNB have accumulated over the years.

Federal Reserve Interest Rate Cuts

Additionally, there are signs that the Federal Reserve will start cutting interest rates later this year or in 2026 as the economy deteriorates because of Donald Trump’s tariffs.

Macro data released this month revealed that hiring has largely stalled, with the economy adding just 73k jobs in July and the average of 35k in the previous month.

The Fed will likely shift its focus to safeguarding the labor market instead of focusing on inflation. Fed cuts will be bearish for Circle stock price because of how the company makes money.

Circle receives money from users, who include individuals and corporates, and gives them the USDC stablecoin. Like a bank, the compan then invests these funds and generates a return.

The main difference with a bank is that it is limited in how it can invests these funds. The GENIUS Act mandated it to only invest in short-term bonds whose yield is impacted by Fed actions.

Therefore, rate cuts by the Fed will likely reduce the amount of returns it generates from its investment. It will need to offset this with increasing the amount of USDC in circulation and improving its other revenue sources.

Lockup Expiration Will Hurt Circle Share Price

Additionally, the stock could experience what CoreWeave went through recently. CoreWeave, one of the top IPOs of the year, plunged even after it published strong results last week.

The decline plunged because the earnings coincided with the lock-up expiration date. A lockup expiry is a situation where insiders can sell their shares after the IPO. In its case, insiders sold shares worth over $1 billion.

Circle stock price will likely plunge towards its lockup expiration day later this year.

Other Risks for Circle Shares

Circle stock price faces other potential risks later this year. First, there is a dilution risk as the company has already started raising money. It recently filed to raise cash by selling 10 million Class A shares, diluting existing investors.

The other risk is that the stablecoin industry has become highly competitive, with the number of stablecoins rising. Some of the top stablecoins that may hurt its business are Ripple USD (RLUSD), PayPal USD (PYUSD), Wyoming’s FRNT, and Gemini USD (GUSD).

There are also concerns about its valuation, which has become stretched despite the recent stock crash.