Circle Soars 50% as Short Squeeze Fuels Post-Earnings Rally

Circle stock has erupted nearly 50% higher in fewer than two trading sessions after releasing fourth quarter earnings on Wednesday, but analysts say the explosive move owes more to a violent short squeeze than to underlying business strength. The USDC stablecoin issuer, trading under the ticker CRCL, snapped an 80% drawdown from record highs set last year as bearish hedge fund bets were forcefully unwound. According to Markus Thielen, founder of 10x Research, the rally's true driver was positioning, not financials.

Why Is Circle Stock Surging After Earnings?

The short squeeze is the primary explanation for Circle's outsized post-earnings move, according to analysts. Markus Thielen of 10x Research noted that hedge funds had accumulated sizable bearish exposure ahead of the print, creating a setup he characterized as a "high-probability short squeeze rather than a fundamental re-rating." When Circle's numbers arrived ahead of forecasts, those crowded shorts were caught offside.

Thielen estimated that hedge funds shed approximately $500 million in a single session as the squeeze accelerated. The magnitude of the stock's reaction — up roughly 45% in under two days — far exceeded what the earnings numbers alone would have justified, he said in a statement. "The real catalyst was positioning," Thielen explained, adding that the violent unwind amplified what would otherwise have been a modest bounce.

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 Profitability Decline

Circle's fundamentals painted a mixed picture beneath the surface-level beat. The company's flagship USDC stablecoin expanded to $75.3 billion in circulation, a 72% jump year over year that outpaced rival Tether's USDT growth, according to Harvey Li, founder of Tokenization Insight. Revenue derived from reserve income — primarily U.S. government debt backing USDC — climbed 58% to $2.64 billion as benchmark interest rates compressed over the prior year.

However, distribution costs rose even more sharply, surging 66% to $1.66 billion, reflecting the heavy expense of incentivizing partners and exchanges to expand USDC adoption. Despite booming circulation figures, Circle swung 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 report, highlighting the gap between revenue growth and profitability.

Mizuho Lifts Circle Price Target to $90

Japanese investment bank Mizuho raised its price target on Circle to $90 from $77 after the stronger-than-expected fourth quarter results. Analysts Dan Dolev and Alexander Jenkins said the report eased investor pessimism, noting that both revenue and profit exceeded consensus estimates. The pair cited growing adoption from prediction markets — particularly Polymarket — and emerging demand from agentic commerce as meaningful tailwinds for USDC.

Agentic commerce refers to the use of autonomous AI agents that transact across digital marketplaces, and Circle's management highlighted USDC as a potential default currency for such interactions. Dolev and Jenkins noted executives highlighted high-frequency transaction flows on betting platforms as near-term use cases fueling stablecoin demand.

What Does the Outlook Mean for Circle Investors?

Circle investors face a complex setup: strong adoption metrics are offset by deteriorating profitability and the risk that falling interest rates erode reserve income further. Mizuho now models average USDC circulation of roughly 123 million in 2027, projecting reserve income of approximately $3.7 billion and EBITDA of $916 million for that year, assuming rate cuts proceed in line with market expectations.

Applying a 24x EBITDA multiple — a premium relative to peers including Visa, Mastercard, Coinbase, and Robinhood — the analysts arrived at the $90 price target. Mizuho maintained its neutral rating on the stock, however, cautioning that lower interest rates could still weigh on Circle's core reserve income stream. For now, the short squeeze has delivered a dramatic reprieve from months of selling pressure, but the rally's durability hinges on Circle converting surging USDC adoption into sustainable profits.