Circle Internet Group, Inc. (CRCL, BUY) - 3Q26 Preview: BTC Bull Cycle Meets Higher Reserve Yields; Maintain BUY and Raise PT to $115 from $100

Circle Internet Group, Inc. (CRCL, BUY) - 3Q26 Preview: BTC Bull Cycle Meets Higher Reserve Yields; Maintain BUY and Raise PT to $115 from $100

We reiterate our BUY rating and raise our price target to $115 from $100 ahead of CRCL’s 3Q26 earnings. We believe Bitcoin has entered a new bull-market regime, strengthening the outlook for USDC demand as crypto activity recovers. At the same time, higher policy rates should support Circle’s reserve return rate. This combination creates a favorable operating backdrop: an expanding reserve base alongside stronger yields. Our higher estimates reflect increasing confidence in this earnings trajectory. Additional tightening does not necessarily interrupt the BTC bull cycle. Our September 22 Bitcoin report established a $250,000 cycle target by 2029 or earlier. BTC absorbed September’s anticipated 25bp hike and subsequently surpassed its spring high, despite further tightening remaining in view. Higher rates can create short-term volatility and tighten liquidity, but they also increase government refinancing costs and debt-service pressure as existing debt rolls over. With persistent primary deficits, we believe this strengthens the eventual incentive for financial repression—policies that contain real government financing costs—and supports Bitcoin’s longer-term monetary premium. Recent USDC data already show the demand recovery beginning. From August 18 through October 5, BTC’s daily close increased 32.5% to approximately $85,700, while USDC circulation rose 3.3% from $71.8B to $74.2B. USDC reached $75.3B in late September before moderating, and its market share increased from 27.5% to 27.9% over the full period. The recovery is still modest, but the concurrent improvement suggests that stronger crypto conditions are beginning to translate into higher dollar liquidity balances. We expect a sustained bull cycle to broaden demand through altcoin trading, market-making, on-chain settlement, DeFi collateral and yield-seeking activity. The 2022–23 USDC lag should not be treated as a fixed transmission rule. BTC’s recovery then overlapped with USDC-specific confidence and distribution pressures, including the SVB-related depeg and redemptions, alongside Binance’s earlier conversion of USDC balances into BUSD. USDT regained its previous circulation peak in June 2023, indicating that stablecoin demand was recovering even while USDC continued to contract. We therefore interpret much of that divergence as market-share loss rather than an absence of recovering crypto demand. With USDC’s share currently more stable, incremental demand can translate more directly into circulation growth. We forecast 3Q revenue of $835M and adjusted EBITDA of $246M. Revenue is expected to increase 13% y/y and 19% q/q, while adjusted EBITDA rises 43% y/y with a 29.4% margin. We estimate reserve income of $652M, based on average USDC circulation of $73.6B and a 3.54% reserve return rate. Average circulation remains below 2Q’s $76.5B, reflecting the timing of the late-quarter recovery. Other revenue of $184M includes our assumed $150M of Arc presale revenue recognition, which contributes materially to the quarter’s earnings. Our focus is therefore on the forward circulation and reserve-yield outlook alongside the reported 3Q results. Estimate revisions support the higher price target. We raise FY27 revenue by 28% to $3.90B and adjusted EBITDA by 36% to $833M. Reserve income increases 30% to $3.67B, driven primarily by raising our average reserve return assumption to 4.17% from 3.27%, while average USDC circulation increases 2% versus our prior estimate to $88.0B. For FY26, we raise revenue by 3% to $3.01B and adjusted EBITDA by 4% to $696M.