The Circle stock price has pulled back and entered a bear market after Donald Trump signed the closely watched GENIUS Act into law. CRCL shares plunged to a low of $195, down by over 35% from its all-time high. Will it rebound towards its August earnings?
GENIUS Act Will Benefit Circle Stock
The Circle stock price has dived in the last three consecutive days, erasing some of the gains made last week when it jumped by double digits. This surge happened as market participants cheered the House of Representatives, which passed the GENIUS Act.
The GENIUS Act became the first crypto bill to pass in the House of Representatives and the Senate. It has established rules that all stablecoin issuers in the United States must adhere to.
This bill benefits Circle in several ways. First, the company already adheres to the rules set by the bill. For example, the USDC stablecoin is only backed by the US dollar and short-term government bonds. It also delivers monthly reports on its holdings and is audited by Deloitte. This means that it will not need to change its business model or invest more money to comply with the laws.
Second, Circle will benefit from creating partnerships with companies that are seeking to embrace these stablecoins. Firms like Amazon, Walmart, and Target have discussed creating their stablecoins to reduce transaction costs and potentially generate revenue by investing their deposits.
While some companies will succeed by creating their stablecoins, many others will opt to use established brands. The three most notable ones are Ripple USD (RLUSD), PayPal USD (PYUSD), and Circle’s USDC.
Third, USDC will likely receive funds from Tether since its USDT does not meet the criteria set by the GENIUS Act.
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Why CRCL Shares Dropped After the GENIUS Act
Therefore, the Circle stock price dropped as the hype surrounding the GENIUS Act faded. This crash is likely because of a situation known as buy the rumor, sell the news.
This is a situation where an asset rises before a major event or news happens, and then plunges after it happens. In this case, the Circle stock price jumped before the House voted for the GENIUS Act and then plunged after Trump signed it into law.
The decline is also because the USDC market capitalization is not growing as fast as it did before. It has remained around the $64.5 billion since July 17th, ending the recent growth. For example, its assets jumped from $62 billion on July 15 to $6.4 billion on July 17.
The stalling USDC growth is notable for the Circle share price due to how the company generates revenue. It generates income by investing its holdings in government bonds, which currently yield approximately 4%. This means that, all factors constant, its revenues this year will be about $2.56 billion.
Circle Earnings Ahead and Impact on the Stock
Circle’s stock price has two major catalysts ahead. First, the company recently applied for a National Trust Charter with the Office of the Comptroller of the Currency (OCC).
There are chances that the company will receive the charter, which will help it replace BNY Mellon as its custodian for its reserves. It will also be in a position to offer custodial services to other companies.
The other catalyst for the stock will be its first earnings as a publicly traded company. These results will provide more color on its business and forward guidance. According to Yahoo Finance, analysts expect that its revenue will come in at $643 million and its annual guidance to be $2.6 billion.
Technicals suggest that the Circle stock price will have a major breakdown in the coming weeks. That’s because it has formed a double-top pattern whose neckline is $171.40, its lowest point on July 1. This pattern often leads to more downside.
Summary
The Circle stock price has moved into a bear market this month, even after Trump signed the GENIUS Act into law. It has formed a double-top pattern, pointing to more downside ahead of its earnings.
