Morgan Stanley Slashes Circle Price Target Amid Shrinking Stablecoin Supply

Circle's stock took a hit after Morgan Stanley downgraded the stablecoin issuer to underweight from equal-weight, cutting its price target to $38. The move comes as Circle faces growing competition in the tokenized cash market and a shrinking USDC supply.

Morgan Stanley analyst James Faucette pointed out several structural headwinds facing the company, including reserve income being highly sensitive to both USDC supply size and prevailing interest rates. He also noted that Circle is moving towards revenue streams with lower margins as it diversifies beyond stablecoin issuance.

The bank cut its USDC supply forecasts by roughly 33% for 2027 and 44% for 2028, which would mean a shrinking pie for Circle at the same time it needs to convince investors of growth. This has led some on Wall Street to question whether Circle's valuation is sustainable.

JPMorgan initiated coverage with an underweight rating in June 2025, expressing skepticism about the company's valuation even back then. The projected contraction in USDC supply and lower-margin income from diversification efforts could make Morgan Stanley's price target of $38 seem less like a worst-case scenario.