Amidst a Major Selloff, Cathie Wood Was Buying Circle Stock. Why?
Shares in the technology sector have been deemed to be overvalued for some time now. Thanks to the AI boom, almost any and every tech stock has seen its bouts of sizzling rallies. However, skepticism around huge capex payoffs and the “cloud” over software stocks has resulted in an unwinding of the trade to some extent.
In such a scenario, one would expect the mercurial Cathie Wood to come to the rescue of these stocks, right? Wrong. Amid signs of profit-taking and portfolio rebalancing, the CIO of investment management firm Ark Invest has trimmed its stake in bellwether tech names such as Nvidia (NVDA), AMD (AMD), Meta (META), Alphabet (GOOG) (GOOGL), and Netflix (NFLX), among others. Yet, there was an exception.
Founded in 2013, Circle (CRCL) is a financial infrastructure company built around stablecoins. Best known as the founder of the USDC stablecoin, Circle operates at the intersection of crypto infrastructure, payments, and digital dollars.
Valued at a market cap of $22.2 billion, CRCL stock is up 18% on a year-to-date (YTD) basis. Notably, Wood’s funds bought about 161,000 shares of the company, ranging in value between $16 and $17 million.
That begs the question, why did Wood make an exception for Circle? Let’s find out.
One of the possible reasons for Wood’s bullishness about Circle could be its excellent growth rate. After starting with a miss on earnings in its first quarterly results post listing, Circle reported a beat on both revenue and earnings in the most recent quarter.
Total revenue and reserves grew by 77% from the previous year to $770.2 million, as USDC in circulation at the end of Q4 2025 stood at $75.3 billion, up 72% in the same period. Conversely, earnings increased manifold as the company moved from almost breakeven to report an EPS of $0.43 per share in the quarter. Further, this came in much higher than the consensus estimate of an EPS of $0.16.
Net reserve margin, the key metric that shows the profit Circle earns from investing the reserves that back USDC, after sharing revenue with partners and paying related costs, improved materially to 37% in Q4 2025 compared to 30% in the corresponding period a year ago.
In terms of cash balance, the company ended the quarter with a cash balance of $1.5 billion. However, the amount put aside for stablecoin holders stood at a substantial $75.1 billion. The company had no short-term debt in the traditional sense; however, deposits from stablecoin holders stood at $74.9 billion.
While its financials are certainly on the right trajectory, Wood’s investment in Circle must also have something to do with the passage of the GENIUS Act last year. This specific legislation established a strict federal framework for stablecoins, demanding full reserves and regular public disclosures. A recent executive order also flatly banned the creation of a central bank digital currency in the United States. This effectively crowns compliant private issuers like Circle as the ultimate architects of the digital dollar, handing them an incredible regulatory moat.
On the other hand, Circle totally separates itself from peers through an uncompromising commitment to regulatory compliance and absolute asset transparency. Rival stablecoins have historically lived in shadowy regulatory gray areas. Circle, on the other hand, backs its USDC token entirely with highly liquid cash and equivalent assets. This crystal-clear reserve model meshes perfectly with stringent new international frameworks like the Markets in Crypto Assets Regulation in Europe.
Notably, the company also goes way beyond just minting a token by providing a massive financial ecosystem. Their Cross Chain Transfer Protocol lets users move USDC natively across different blockchain networks, entirely dodging the security nightmares of traditional bridge transfers. They also hold money transmitter licenses across 46 states and major global hubs, building an institutional-grade liquidity foundation that Wall Street actually trusts.
Meanwhile, the biggest upcoming catalyst for shareholder value is definitely the launch of Arc. The company describes this open Layer 1 blockchain as the economic operating system for the internet. Arc is purpose-built to unite programmable money with real-world economic activity, pushing Circle into the realm of a core infrastructure provider. They are also beefing up developer services with new tools like xReserve, which lets enterprises launch their own USDC-backed stablecoins easily.
On top of that, they are aggressively rolling out tokenized funds like USYC to blend traditional financial yields with the speed of blockchain tech. Crucially, the company recently scored conditional approval for a National Trust Bank charter. This direct banking integration will slash operational costs and cement their permanent status within the modern financial system.
However, Circle faces intense pressure on multiple fronts despite having a massive regulatory head start. The digital asset landscape is notoriously volatile. The company must maintain its strict one-to-one peg during periods of extreme market stress. If broader crypto trading volumes dry up, the transactional revenue fueling their entire payments network could take a serious nosedive. Traditional financial titans are definitely not sitting idle either. Massive global banks and entrenched payment processors are busy exploring their own tokenized deposit solutions, which threatens to completely commoditize stablecoin issuance.
Thus, analysts have deemed CRCL stock a “Moderate Buy,” with a mean target price of $126.28. This indicates an upside potential of about 34% from current levels. Out of 22 analysts covering the stock, 10 have a “Strong Buy” rating, one has a “Moderate Buy” rating, 10 have a “Hold” rating, and one has a “Strong Sell” rating.
On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com