TL:DR
Circle’s 48% stock rout will get worse with rate cuts and slow growth, analysts say
Future interest rate cuts from the Federal Reserve could wreak havoc on the stablecoin issuer’s revenue, according to Omar Kanji, a partner at crypto venture firm Dragonfly.
A 1% cut in interest rates will slash Circle’s revenue by a whopping $618 million, a 23% drop, Kanji said in a X post.The reason? A large part of Circle’s revenue comes from the short-dated government bonds it holds to back the $65 billion worth of USDC in circulation, Kanji argued. When the Fed lowers interest rates, the return on those bonds falls in step, squeezing Circle’s bottom line.
To offset the impact, Circle needs to have the USDC supply grow by $28 billion, or 44% of its current supply, to stay neutral, Kanji said.THE FED IS GOING TO DESTROY CIRCLE!!! 😂😂
Shitstonks be shitstonkin'
Hahaha
I wonder if they end up holding riskier assets to compensate.
If they don’t their stock price will get crushed
This is the Terra Luna way. Start buying bitcoin
Also, hence why bonds are hardly safe and have risk too!!
And everyone says crypto is volatile :)))
Or was this a "predictive" crash before a possible aggressive rate cut?
If lowering the interest rate makes Bitcoin moon but stable coin companies go out of business, well that’s alright