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Middle East tensions, higher oil boost Circle (CRCL) shares as rate-cut odds fade: Mizuho

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Middle East tensions, higher oil boost Circle (CRCL) shares as rate-cut odds fade: Mizuho

Shares of stablecoin issuer Circle (CRCL) have risen over 20% this week, outperforming the broader market following Israeli and U.S. airstrikes on Iran over the weekend.

Japanese bank Mizuho attributed the rally in part to a sharp rise in oil prices, as tensions in the Middle East exploded. Higher crude prices could rekindle inflationary pressures, lowering expectations for Federal Reserve rate cuts.

That dynamic matters for Circle. The company earns the bulk of its revenue from interest income on the U.S. government debt it holds as reserves backing its USDC stablecoin. Higher interest rates translate into greater yield on those reserves, directly supporting revenue. Conversely, rate cuts compress that income stream.

Since U.S. and Israeli strikes on Iran over the weekend, WTI crude has climbed roughly 7%–8% on elevated geopolitical risk and supply disruption concerns.

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Crypto markets were jolted at the outbreak of war in the Middle East on Saturday, with bitcoin sliding sharply in early trading amid a broader risk-off move, but prices have since stabilized.

Analysts Dan Dolev and Alexander Jenkins estimated that reduced expectations for rate cuts add about 1% to their Circle 2026 and 2027 revenue forecasts.

More importantly, the analysts pointed to a doubling in the “right tail risk” of a no-rate-cut scenario in 2026, according to Chicago Mercantile Exchange (CME) FedWatch data, a shift that could further support Circle’s valuation multiple.

A roughly 5% rise in bitcoin over the past 24 hours may also be contributing to positive sentiment. The largest cryptocurrency is currently trading around $68,100.

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The bank raised its Circle price target to $100 from $90, while maintaining a neutral rating on the shares. The stock was trading 6% higher at $101.90 at publication time.

While higher-for-longer rates are a near-term positive, longer-term revenue growth could face pressure as stablecoins become increasingly commoditized, the report added.

Circle shares gained more than 45% last week in a violent short squeeze following fourth quarter earnings. That move snapped what had been a brutal 80% drawdown from record highs hit last year.

Read more: Circle’s post-earnings surge nears 50% as short squeeze, not strong financials, fuels rally

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Crypto World

Stablecoins Do Not Threaten Banking Just Yet: Analyst

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Stablecoins Do Not Threaten Banking Just Yet: Analyst

The impact of stablecoins on the banking sector appears “limited” at the current phase of the adoption cycle, but banks could face increasing competition and an erosion of market share as the stablecoin sector and tokenized real-world assets (RWAs) grow in market capitalization. 

“So far, the use of stablecoins remains limited, but their market capitalization exceeded $300 billion at the end of last year,” Abhi Srivastava, associate vice president of Moody’s Investors Service Digital Economy Group, told Cointelegraph.

The stablecoin market cap has surged past $300 billion. Source: RWA.xyz

The role of stablecoins in payments, cross-border commerce and onchain finance is “expanding,” despite their currently limited role, Srivastava said, adding that existing payment systems in the US are already “fast, low-cost and trusted.” He said:

“For the banking sector, at this stage, disruption risk appears limited. In the near term, US rules that prohibit stablecoins from paying yield mean they are unlikely to replace traditional deposits at scale domestically.”

However, over time, growing adoption of stablecoins and tokenized RWAs, traditional or physical financial assets represented on a blockchain by a token, could place “pressure” on the banking sector, leading to deposit outflows and reduced lending capacity, he said.

Stablecoin regulatory policy has become a hot-button issue among crypto industry executives and those in the banking sector, with fears that yield-bearing stablecoins could erode banking market share proving to be a stumbling block for the CLARITY crypto market structure bill in Congress. 

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Related: Stablecoins behave like FX markets as liquidity splits: Eco CEO

CLARITY Act stalled, as banks fight yield-bearing stablecoins

The Digital Asset Market Clarity Act of 2025, also known as the CLARITY Act, is a comprehensive crypto market regulatory framework that establishes an asset taxonomy, regulatory jurisdiction and oversight over the crypto markets.

The CLARITY crypto market structure bill. Source: US Congress

It is now stalled in Congress after a group of crypto industry companies, led by cryptocurrency exchange Coinbase, publicly stated opposition to earlier drafts of the bill.

A lack of legal protections for open-source software developers and a prohibition on yield-bearing stablecoins were among some of the most contentious issues cited by crypto industry opponents of the legislation.

Several attempts have been made by US lawmakers and the White House to negotiate a bill acceptable to both the crypto industry and the bank lobby.

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Earlier this month, North Carolina Senator Thom Tillis said he plans to release an updated draft bill proposal that would be acceptable to both sides; however, the bill has reportedly received pushback, according to Politico, and has yet to be publicly released. 

However, other crypto industry executives and market analysts have warned that if the CLARITY Act fails to pass, it could open the crypto industry up to future regulatory crackdowns by hostile lawmakers and officials.

Magazine: Stablecoins will see explosive growth in 2025 as world embraces asset class