Circle shares fall after Morgan Stanley downgrade

Shares of Circle Internet Group fell sharply on Monday, August 3, following a major downgrade from Morgan Stanley that highlighted concerns over the long-term growth of its USDC stablecoin. The stock declined approximately 6% in premarket trading to $58.81 after the investment bank cut its rating to Underweight from Equal Weight and slashed its price target to $38 from $106.

Morgan Stanley’s downgrade was driven by significantly reduced expectations for USDC circulation, a core driver of Circle’s revenue from reserve income. The bank lowered its forecasts for USDC supply by about 33% for 2027 and 44% for 2028, citing slower-than-anticipated stablecoin growth and increasing competitive pressures. Analyst James Faucette noted that USDC has effectively not grown since the third quarter of 2025, challenging the company’s target of averaging 40% annual growth across market cycles.

The report outlined several headwinds for Circle’s business model. It argued that tokenized money market funds and tokenized deposits are emerging as competitive products that could divert capital away from USDC, pressuring the revenue Circle earns on its reserves. Morgan Stanley also expressed skepticism...