The bullish case for the Circle stock as it remains in a bear market

Circle stock price has pulled back from the recent relentless rally as investors book profits and the supply of the USDC token falls. CRCL was trading at $90, down by 33% from its highest point in March. Still, the company has some major bullish catalysts that may push it higher in the long term.

Why Circle stock has retreated 

There are three main reasons why the CRCL stock price has pulled back in the past few days. First, the retreat is happening as investors book profits after rising by over 176% between its lowest level in February to its highest point in March.

Second, the retreat happened as it became clear that the US Senate will not pass the CLARITY Act this year. The main issue is that banks have successfully lobbied against stablecoin yield, which they argue will lead to cash outflows from their institutions.

Odds of the CLARITY Act becoming law have dropped recently as traders on Polymarket and other prediction platforms like Kalshi predict that Democrats will win the Senate in November this year. 

Third, the stock declined after Tether, which owns USDT, appointed KPMG as the auditor. This is the first time that the company hired a big 4 auditor. As a result, traders believe that the company may gain more inflows at the expense of USDC.

The bullish case for the CRCL stock 

Still, there are signs that the Circle stock price will do well in the coming months. First, the USDC stablecoin is gaining market share in the crypto industry, with its total assets rising to over $79 billion from below $70 billion a few months ago.

More data shows that people are using the stablecoin in payments and traders. The USDC transactions rose to 1.1 billion in the last 30 days, with the transaction volume rising to over $6.8 trillion. Its addresses jumped to over 15.7 million.

In contrast, USDT has over $184 billion in value, 33.3 million in stablecoin addresses, and handled over 709 million in transactions. Its volume jumped to over $1.1 trillion in the same period.

Circle stock will also benefit from the ongoing Iran war that has pushed energy prices higher in the past few months, with the WTI crude oil price rising to $112. Analysts expect the upcoming data to show that the headline Consumer Price Index (CPI) rose to 3.4% in March, while the OECD estimates that the figure will jump to 4.2% this year.

Soaring inflation means that the Federal Reserve will maintain higher interest rates in the coming meetings. Some analysts also expect that the bank will hike interest rates, especially after the US published strong jobs numbers, with the economy adding over 176k jobs and the unemployment rate dropped to 4.3%.

Circle will benefit by higher interest rates because it makes most of its money by investing its cash in short-term interest rates, which react to the actions by the Federal Reserve.

The stock will also benefit from its Circle Payment Network, which aims to disrupt the Swift network by making it easy to send money globally. CPN has already onboarded over 50 banks and is in talks with over 80 others. 

Circle stock will also benefit from the upcoming Arc launch. Arc aims to be a unique layer-1 network that will compete with potential chains like Ethereum and Solana. Data shows that the testnet is now handling over 19.7k contracts and has already handled over 302 million transactions.

Circle stock price technical analysis 

CRCL stock chart | Source: TradingView 

The daily timeframe chart shows that the CRCL stock price has rebounded in the past few months, moving from a low of $48 in January to a high of $136. It has now pulled back to the current $90.

On the positive side, the stock has formed a morning star candlestick pattern, which often leads to a strong bullish breakout over time. It has moved to the second phase of the Elliot Wave pattern.

This means that it may soon move to the third phase, which is usually the longest. As such, the most likely scenario is where it rebounds and initially moves to the year-to-date high of $136. A move above that price will point to more gains, potentially to the psychological level at $200.