Morgan Stanley downgraded Circle from a Hold rating to Underweight on August 3 and reduced its price target from $106 to $38. The analysis cited a decline in USDC circulation as a primary factor, alongside concerns about Circle’s high sensitivity to reserve income and a shift in the company’s revenue mix toward lower-margin transaction fees.

The downgrade reflects increased skepticism about Circle’s near-term outlook, especially given the shrinking USDC supply, which is a significant part of its business model and revenue generation. The analysts noted that the reduction in circulating USDC could impact reserve income and overall profitability.

In addition, Morgan Stanley lowered its forecast for USDC, indicating expectations of continued decline in the stablecoin’s market share and associated income streams. The shift in business mix toward lower-margin transaction revenue further compounds concerns about the company's growth trajectory and financial stability.

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