Pessimistic Outlook for Circle as BlackRock Grows: Morgan Stanley Sharply Slashes Price Target
Morgan Stanley has turned its outlook on Circle to negative, sharply lowering its price target while highlighting USDC’s loss of market share and increasing competitive pressure.
Financial giant Morgan Stanley has downgraded its rating for Circle (CRCL), one of the most important players in the cryptocurrency world, to “underweight,” painting a pessimistic picture of the company’s future. In a radical move, the bank slashed its price target from $106 to $38. This action highlights the financial pressure on USDC, the company’s largest revenue source, at a time when the balance of power in the stablecoin market is shifting.
The team led by analyst James Faucette predicts that the contraction in USDC supply will negatively impact reserve revenues. The bank lowered its supply estimates by 33 percent for 2027 and 44 percent for 2028. This situation is causing Circle to shift from high-profit reserve revenues to lower-margin transaction fees. Following the report, the company’s shares lost 6 percent in value, bringing the total year-to-date loss to 30 percent.
New Competitors and the BlackRock Threat in the Stablecoin Wars
One of the biggest challenges Circle faces is the entry of institutional giants into this space. In particular, the new tokenized money market products launched by BlackRock directly threaten USDC‘s dominance. Furthermore, the shared economy structure offered by next-generation models like Open USD makes it more costly for Circle to maintain its market share. Morgan Stanley argues that this intense competition will weigh down the company’s profitability in the long run.
On the other hand, the bank is also skeptical about Circle’s initiatives in the field of autonomous payments. Daily transaction volumes remaining around $41,900 and average amounts of 24 cents per transaction indicate that commercial adoption in this area is still very limited. The fact that JPMorgan previously issued a downgrade with a similar view proves that the “prisoner’s dilemma” in the market is deepening for the stablecoin issuer. Company management is struggling to strike a difficult balance between maintaining profitability and expanding its distribution network in the face of these mounting pressures.