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Morgan Stanley slashed Circle's target price to $38, basically trying to buy cheap Simply put, there are three reasons for their target price downgrade: "USDC circulation shrinkage, competitor threats, rising distribution costs" 1⃣ USDC circulation shrinkage The circulation volume has basically been growing every quarter, except for Q4 2025 with +2.2%, +2.3%, and -4.8%. Based on just three quarters' performance and only one quarter being negative, claiming USDC's shrinkage is structural is unfounded. In fact, USDC's all-time high circulation volume occurred this year. As for mainstream media reports, they downgraded USDC supply assumptions for 2027 and 2028 by 33% and 44%, respectively, relative to Morgan Stanley's previous model. The media only reported percentages without mentioning actual amounts, so it's impossible to verify whether this downgrade reflects real decline or just a growth rate adjustment. 2⃣ Competitor threats Institutions like BlackRock and Franklin have launched tokenized money market funds that pay interest to holders, whereas USDC does not. Morgan Stanley believes this will divert funds away from stablecoins. In reality, the current leader in tokenized money market funds is Circle itself. USYC surpassed BlackRock's BUIDL in March this year; BUIDL's market share dropped from 46% to 18%, while USYC holds 20%. Moreover, Binance has already listed USYC as an over-the-counter collateral for institutional derivatives. 3⃣ Rising distribution costs Morgan Stanley believes that the launch of Open USD will increase Circle's costs to maintain USDC distribution. Additionally, contracts signed with Coinbase and Hyperliquid will weaken USDC's economic benefits. They expect the RLDC profit margin of 41.4% in Q1 to fall back to 38-40%. The actual financial report proved this wrong, with RLDC profit margin at 41.2%, net reserve profit margin at 38.5%, and the full-year RLDC guidance raised to 41.7-43.7%. Other income full-year guidance is 310-330 million, nearly doubling. The report also mentioned a 73% year-over-year increase in platform share, meaning more USDC stays on Circle's own platform, saving distribution costs. In summary: the $38 target price is based on assumptions of declining balances and profit margins. After the financial report, profit margin decline did not materialize but reversed. However, this does not mean $CRCL's outlook is entirely positive. Profit margin improvements have limits, but circulation shrinkage has no floor. A reduction of 5 billion in circulation from the peak is a fact, and next year will face the impact of interest rate cuts. $CRCL