Circle's Rally Nears 50% on Short Squeeze, Not Earnings

What to Know

45% -- Circle stock jumped nearly half its value in under two trading sessions following its Wednesday Q4 earnings report
$500 million -- Hedge funds lost an estimated half-billion dollars in a single day as crowded short positions unwound, according to 10x Research
$75.3 billion -- USDC circulation surged 72% year over year, outpacing rival Tether, yet Circle swung to a $70 million net loss
$90 -- Mizuho raised its price target from $77, citing prediction markets and agentic commerce as growth catalysts

Circle stock has soared approximately 45% in fewer than two trading sessions after the USDC stablecoin issuer released fourth-quarter earnings on Wednesday, reversing a punishing 80% drawdown from record highs last year. Analysts say the explosive move owes more to a massive short squeeze than to Circle's financial performance, with hedge funds reportedly losing roughly $500 million in a single day as bearish bets backfired.

Why Is Circle Stock Surging After Earnings?

The answer is positioning, not profit growth. Circle's post-earnings rally was ignited by overcrowded short bets that turned a solid earnings beat into a violent squeeze, according to Markus Thielen, founder of 10x Research. Thielen characterized the event as a "high-probability short squeeze rather than a fundamental re-rating," noting that hedge funds had built sizable bearish exposure heading into the print.

Short sellers collectively lost around $500 million in just one day as CRCL shares ripped higher, Thielen estimated. The stock's reaction far exceeded what the headline numbers alone would justify, he told reporters, pointing to lopsided positioning as the primary accelerant behind the nearly 50% two-day advance.

The magnitude of the move was not driven purely by the headline numbers. The real catalyst was positioning.
— Markus Thielen, Founder of 10x Research

USDC Growth Masks Deteriorating Profitability

Beneath the surface, Circle's core economics showed strain despite booming stablecoin demand. The flagship USDC stablecoin reached $75.3 billion in circulation, a 72% year-over-year jump that outpaced rival Tether's USDT growth, Harvey Li, founder of Tokenization Insight, noted in a report.

Reserve income -- primarily from U.S. government debt backing USDC -- climbed 58% to $2.64 billion as benchmark rates compressed. But distribution costs rose even faster, up 66% to $1.66 billion, underscoring the steep expense of incentivizing partners to broaden adoption.

The bottom line swung sharply. Circle went from a $156 million net profit in 2024 to a $70 million loss, Li pointed out. "Stablecoin may be scaling; stablecoin issuance is a tough business," he said in a statement.

Mizuho Lifts Price Target to $90

Japanese investment bank Mizuho raised its Circle price target to $90 from $77 after the stronger-than-expected fourth quarter. Analysts Dan Dolev and Alexander Jenkins said the results topped expectations on both revenue and profit, easing investor anxiety after a prolonged period of pessimism.

The Mizuho analysts highlighted prediction platforms, particularly Polymarket, as meaningful drivers of recent USDC growth. Management also emphasized USDC's emerging role in agentic commerce, describing the stablecoin as a potential default currency for autonomous AI agents transacting across digital marketplaces.

Mizuho now projects average USDC in circulation of roughly 123 million in 2027, with reserve income of approximately $3.7 billion and EBITDA of $916 million that year, assuming rate cuts in line with consensus. Applying a 24x EBITDA multiple -- a premium to peers such as Visa, Mastercard, Coinbase, and Robinhood -- the analysts arrived at their $90 target while maintaining a neutral rating on CRCL shares.

What This Means Going Forward

Circle's near-50% post-earnings surge shows how positioning dynamics can overwhelm fundamentals. The short squeeze delivered dramatic gains, but the underlying business faces a core tension: USDC circulation is expanding while profitability is contracting. Lower interest rates would further compress the reserve income that drives the bulk of Circle's revenue.

For investors, the key question is whether agentic commerce and prediction-market adoption can offset margin pressure. Mizuho's neutral rating suggests caution, and the stock's 80% drawdown before this rally underscores the volatility inherent in stablecoin issuer equity. Whether the squeeze marks a turning point or a temporary reprieve depends on Circle's ability to translate surging USDC supply into durable profits.