Mizuho Securities has revised its view on Circle Internet Group (NYSE:CRCL), the company behind the widely used USDC stablecoin, signaling heightened risks in the digital asset space. The firm lowered its recommendation to underperform from neutral while trimming the target price to $50, down from $85.
This adjustment stems primarily from emerging threats posed by innovative competitors in the stablecoin ecosystem, notably the recently introduced Open USD product.
Analyst Dan Dolev and his team at Mizuho emphasized that Open USD’s distinctive framework could significantly disrupt Circle’s established revenue streams.
Unveiled on June 30 by the Open Standard consortium—a broad alliance encompassing more than 140 entities such as Mastercard, Stripe, Coinbase, and BlackRock—this new dollar-pegged stablecoin employs a pass-through mechanism.
It retains only a minimal operational charge while directing the bulk of earnings from underlying reserves directly to distribution partners and issuers.
This model stands in contrast to Circle‘s current setup, which involves capturing a larger slice of treasury income upfront before allocating shares to collaborators like Coinbase and Binance.
Mizuho analysts argue that Open USD’s approach may compel Circle’s partners to seek bigger portions of reserve yields, thereby squeezing profitability.
The pressure could intensify during critical negotiations, such as the impending renewal of Circle’s revenue-sharing pact with Coinbase in August. Coinbase’s backing of the rival offering might bolster its leverage in those discussions.
In response to these dynamics, Mizuho has updated its internal forecasts.
The bank now anticipates higher distribution and transaction expenses for Circle in 2027, projecting them at 73% of revenue instead of the earlier 64%.
Consequently, the 2027 adjusted EBITDA estimate has been reduced to roughly $699 million—substantially below the prevailing Wall Street consensus around $941 million.
Although the firm incorporated expectations of slightly elevated interest rates that could enhance reserve returns, it concluded these would fall short of offsetting the anticipated margin erosion.
Broader market conditions add to the challenges. USDC‘s outstanding supply has decreased to approximately $73 billion from peaks near $80 billion earlier this year.
This contraction aligns with an overall dip in the stablecoin sector totaling about $10 billion since May, driven by moderated trading activity and increased rivalry from fresh regulated participants.
Circle has made strategic strides, including securing approval as a national trust bank, positioning it as a pioneer in issuing stablecoins under US regulatory oversight.
Nevertheless, the stock experienced mild declines following the downgrade announcement, reflecting investor sensitivity to these competitive signals.
The Mizuho analysis underscores a pivotal evolution in the stablecoin industry. Traditional models reliant on retaining substantial reserve income face scrutiny as distributor-centric alternatives gain traction.
For Circle, sustaining its market position will require nimble adaptations in partnerships, pricing, and innovation to counter these forces.
This episode illustrates the fast-paced nature of fintech and crypto markets, where new consortium-backed initiatives can quickly challenge incumbents.
Market participants will watch closely for Circle’s responses, including potential adjustments to its ecosystem and collaborations, as the sector continues to professionalize and expand. The outcome could influence / potentially impact not only Circle’s valuation but also set precedents for how stablecoin economics develop amid growing institutional involvement.