Circle Stock Selloff Looks Overdone, Analysts Say

Circle stock staged a partial recovery on Wednesday after a brutal session the day before, with analysts at two separate firms calling the Circle stock selloff an overreaction to a pair of converging fears — a stablecoin bill's yield restrictions and a surprise audit announcement from rival Tether. Shares of the USDC issuer changed hands near $102.50 on Wednesday, trimming what had briefly been a 22% weekly decline, per Yahoo Finance. Not long after the opening bell, the stock briefly jumped to $110 before settling lower — still bruised, but clearly off the lows.

What Triggered the Tuesday Plunge?

Two pieces of bad-looking news hit Circle in the span of a single Tuesday morning, and markets didn't stop to untangle them. First came word that the Clarity Act — the stablecoin legislation working its way through Congress — had been updated with compromise language that would bar platforms like Coinbase from passing interest-like rewards to USDC holders. That text reflected pressure from community banking organizations worried about deposit outflows. Crypto lobbyists had negotiated it in, ostensibly as a concession to the traditional finance lobby, and the market read it as a direct hit to Circle's business model.

Then Tether dropped its own headline: the world's largest stablecoin issuer announced it was working with an unnamed Big Four accounting firm on what would be its first legitimate reserve audit — a promise it has dangled since 2014 without following through. For years, Circle's pitch to institutional investors has been simple: we're the compliant alternative. If Tether actually cleans up its audit trail and pushes into the U.S. market, that moat shrinks. Investors hit the sell button on both stories at once.

The damage was real. Coinbase, which earns income from U.S. Treasuries backing USDC, fell nearly 10% on the day to close at $181.04. By the close of trading on Tuesday, Circle stock CRCL had fallen just over 20%, finishing the session at $101.24 before slipping further in after-hours trading.

Clear Street Calls It Overdone

Clear Street analyst Owen Lau wasn't buying the panic. In a Wednesday note, his team argued that while near-term revenue expectations might need trimming, nothing structural had changed for Circle's actual business trajectory. The firm held its $152 price target and Buy rating without flinching.

The analysts pointed to a detail that got buried in the noise: the Office of the Comptroller of the Currency had already proposed rules blocking stablecoins from paying interest well before the Clarity Act headlines landed. A pure yield-pass-through model was already under pressure — Tuesday's news wasn't new bad news, it was confirmation of a constraint the market had already been warned about. On Tether's audit ambitions, Clear Street was equally dismissive: even if USDT's compliance profile improves over time, it's difficult to imagine institutional investors suddenly ranking it above USDC on regulatory standing.

Near-term monetization expectations may need to be tempered, but the strategic demand case for USDC remains intact.

Cathie Wood Bought the Dip — Why It Matters

Cathie Wood didn't need a second opinion. Ark Invest scooped up 161,000 Circle shares across several of its exchange-traded funds on Tuesday — the same session the stock fell off a cliff. According to the Ark Invest Circle shares tracker, the allocation was valued at approximately $16.5 million as of Wednesday. That's not a nibble. That's a public declaration of conviction.

The logic tracks with Clear Street's thesis. If you believe the Tuesday selloff was driven by misread headlines rather than genuine deterioration in Circle's fundamentals, then $101 was an attractive entry point. Ark rarely makes headline purchases into pure noise — the firm has long tracked Circle's positioning in tokenization, AI-native payments, and prediction markets as growth vectors that sit firmly in the fund's investment lane. The purchase signals Ark sees those tailwinds as intact regardless of what Congress eventually passes on stablecoin yield.

Did Investors Misread the Yield Ban?

Bernstein analysts think most of Tuesday's Circle panic came down to a category error — a misreading of exactly who the Clarity Act's yield restrictions actually target. The GENIUS Act stablecoin yield ban debate triggered fears that Circle itself would be blocked from earning interest on its reserves. That is not what the bill does.

The restriction is aimed at platforms distributing yield to end-users — not at issuers like Circle collecting interest on the Treasury holdings that back USDC. Circle earns on the spread. Under a yield ban, the payout to users goes to zero, not Circle's income. Coinbase CEO Brian Armstrong framed it bluntly: a ban on deposit-like rewards would actually make Coinbase more profitable, because the exchange currently passes along most of the USDC reserve income it receives to users. Kill the pass-through, and Coinbase keeps more.

Bernstein reiterated Outperform ratings for both Circle and Coinbase on Wednesday, with price targets of $190 and $440 respectively. The firm predicted Coinbase would eventually find a workaround to any stablecoin yield restrictions and navigate a transition period — short-term turbulence, not structural collapse. Coinbase's stock has still slipped around 10% on the week, closing near $181. Analysts think that gap closes once the legislative text gets properly digested.

Circle does not pay yield to USDC holders. The yield ban restricts platforms distributing yield to end-users, not issuers earning on reserves.