Circle stock jumps amid a crypto rally, but major USDC risks remain

Circle Internet Group stock jumped to its highest level since June 22nd as Bitcoin and most altcoins made a strong comeback. CRCL jumped to a high of $83.13, its highest level since June 22nd, up by 43% from its lowest level this year. Still, Circle faces some major risks ahead of the upcoming Arc Layer 1 launch.

Circle Internet Group stock is rising as cryptocurrencies soar

CRCL stock has done well in the past few days, helped by the ongoing cryptocurrency comeback. Bitcoin is slowly approaching the important resistance level of $720,000, while the market capitalization of all coins is hitting $2.3 trillion. 

The Crypto Fear and Greed Index has jumped to 55, its highest level since April 22nd. In most cases, a soaring index normally leads to more gains in the crypto market. Circle’s shares often do well whenever Bitcoin and most altcoins are in an uptrend.

Bitcoin and other altcoins are benefiting from the ongoing inflows from American investors. Data shows that spot BTC ETF inflows have jumped by over $1.4 billion this month. Also, Ethereum ETF inflows have soared by $534 million this month after adding $365 million last month.

The rally is happening as investors focus on the falling long-term bond yields. Data shows that the 30-year yield dropped to 5.17% from the year-to-date high of 5.33%. This retreat happened after the Treasury Secretary intervened by launching buybacks.

Circle stock jumps ahead of Arc L1 launch

CRCL stock also jumped after the company announced the planned date for the Arc Layer 1 launch. This launch will happen on September 16 this year. 

Arc’s testnet has had over 502 million transactions and has over 2.8 million transacting wallets. It has also achieved some notable network validators like ICE, Mastercard, MoneyGram, SBI, and Standard Chartered.

Circle hopes that the new product will become the main blockchain for stablecoin transactions, beating popular chains like Ethereum and Tron.

However, there is a risk that the network will not be as successful as analysts and traders believe. For one, other companies that have launched their layer-1 and layer-2 chains have largely flopped. Only Robinhood and Coinbase have achieved some substantial success.

Circle Internet’s growth has slowed

There is a risk that Circle’s growth has stalled in the past few months. The most recent results showed that its revenue and reserve income less distribution, transaction, and other costs came in at $289 million, up by 15% YoY from the same period last year. However, this revenue was a small increase from the previous quarter.

Analysts expect the upcoming earnings to show that its revenue rose by 6.35% to $786 million. For the year, analysts expect the revenue growth to be 9.3%, much lower than what it made a year earlier. 

There are signs that the revenue growth will be much slower than expected as the USDC market capitalization has continued falling. It dropped to $72.40 billion from the year-to-date high of over $80 billion.

At the same time, short-term US bond yields have pulled back, with the ten-year moving from 4.37% on July 23rd to 4.177%. 

Circle stock technical analysis

CRCL stock chart | Source: TradingView

The daily chart shows that the CRCL stock has rebounded after forming a double-bottom pattern at $58.30. It has already moved above the neckline of $72.72, its highest level on July 21st. 

The stock has already jumped above the 50-day moving average, while the Relative Strength Index (RSI) has moved close to 70. Therefore, the stock will likely continue rising a bit, and then resume the downward trend.