Veteran investor Cathie Wood recently doubled down on Circle Internet Group (NYSE: CRCL) despite a sharp decline in its stock price over the last year.
Circle is a crypto company popular for its USDC stablecoin. Pegged 1:1 to the U.S. dollar, USDC is the second-largest stablecoin after Tether’s USDT. Such coins are also called “digital dollars” in crypto parlance.
As per the onchain analytics platform DeFiLlama, USDC has a market cap of $73.88 billion, which accounts for 24.36% of the total stablecoin market.
Total Stablecoins Market Cap, Source: DeFiLlama
Related: Explained: What is a stablecoin?
Analyst explains Circle’s growth
On Aug. 19, analyst Alex Obchakevich compared the performance of Circle against that of Visa (NYSE: V) and Mastercard (NYSE: MA), the two payment giants.
Over the last twelve months, Visa is up 5%, Mastercard is up 1%, and Circle is down 42% but has gained 30% in a month, he noted as of Aug. 19.
“Read quickly, it looks like noise. Read slowly, it’s the market changing its mind about who actually earns money on stablecoins.”
When users pay a premium for distribution and avoid stablecoin issuers, Visa and Mastercard rule because they own the rails and the merchants and have roughly 8 billion cards.
In contrast, Circle owns a stablecoin with an interest rate. When these rates fall, Circle bleeds, he explained what he calls an “old thesis.”
But Circle is no longer a “pure rates trade” as it has received regulatory approval to operate as a federally regulated trust bank and has turned profitable in the second quarter with transaction revenue doubling, he pointed out.
The recent Circle rally “isn’t a discovery, it’s a correction of an overdone funeral,” Obchakevich remarked. Though the stock is still down in a year and Wall Street analysts are deeply divided over its price target, the “business underneath has changed shape,” he added.
He also reminded the crypto community about both Visa and…
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