Circle’s Post-IPO Surge Resumes as Investors Eye Coinbase

Stablecoin-issuer Circle’s stock climbed again Thursday (June 26) following a dip this week.

As CNBC reported Thursday, the company’s shares rose 12% after losing 15% in the prior three days. The report said this decline was happening amid increased volatility after Circle’s initial public offering (IPO) and as investors consider speculation around crypto regulation and the Federal Reserve’s upcoming rate decision.

Coming off the Circle IPO, the report added, investors may have set their sights on crypto exchange Coinbase, whose stock climbed 15% on the days when Circle declined, rising more than 5% Thursday.

Coinbase, CNBC noted, is the chief distribution platform for Circle’s USDC stablecoin, receiving half of the revenue generated from the interest earned on Circle’s USDC reserves. In addition, Coinbase makes 100% of the interest on any USDC held directly on its own platform.

According to the report, growing awareness of Circle is causing investors to ponder how Coinbase could benefit from opportunities in the stablecoin arena. Circle’s shares have shot up more than 600% since it went public earlier this month. Coinbase is enjoying its best month since November, on track for a 50% monthly gain, the report added.

“With over $250 billion in circulation and growing merchant interest, stablecoins are arguably the cryptocurrency sector’s most mature product from the point of view of traditional financial services,” PYMNTS wrote Thursday.

Still, widespread adoption may be less inevitable than it seems, that report added, citing an upcoming Bank for International Settlements (BIS) report, which argued that stablecoins “perform poorly” as a form of sound money.

The BIS contended that most stablecoins fail key criteria for a currency, like stability, universal acceptability and trust. In addition, the bank noted that stablecoins are frequently exploited by criminals and don’t have the elasticity of credit that underpins modern financial systems.

“Stablecoins are at a crossroads. On one hand, they’ve gone from niche crypto tools to serious considerations by legacy financial institutions. On the other, they continue to fail the basic tests of stability, acceptability, trust and utility,” PYMNTS wrote. “The BIS isn’t wrong in its critique, but neither are firms like Mastercard and Visa misguided in exploring stablecoin potential. As with any transformative technology, the early phase is messy, marked by high hopes and hard lessons.”