Morgan Stanley downgraded Circle Internet (CRCL) to underweight, cutting its price target from $106 to $38. The reason is a weakened long-term profit outlook. Shares fell 6% on the news, having lost about 30% year-to-date.
Analyst James Fochett expects USDC growth to slow amid pressure on reserve yields and Circle’s shift toward lower-margin transaction revenue. The bank lowered its USDC supply forecast by roughly 33% for 2027 and by 44% for 2028, resulting in EPS estimates 3% and 20% below consensus, respectively.
Additional pressure comes from growing competition from tokenized money market funds and tokenized deposits, as well as the launch of Open USD with decentralized governance and reserve economics, which could increase costs for Circle to maintain USDC distribution incentives.
Morgan Stanley also expressed skepticism about Circle’s progress in agency payments: transaction volume has fallen to about $41,900 per day, with an average transaction size of around 24 cents—a sign of limited commercial adoption.
This is the second consecutive downgrade: earlier, JPMorgan noted that Circle’s revised agreement with Hyperliquid had weakened the economics of USDC, creating a “prisoner’s dilemma” between Circle and Coinbase in the battle for token distribution.