Circle (CRCL) has pulled back from its August highs even as the company experiences substantial tailwinds, including a rebound in the USDC market capitalization, a jump in US Treasury yields, and the rapid growth of Arc, its layer-1 network. The stock was trading at $89 at the time of publication, down from last month's high of $102, and has formed a diamond reversal pattern on the charts.

Arc Layer-1 Gains Traction Even as the Stock Retreats

Circle launched Arc, its layer-1 network, on September 16 to a warm reception, and third-party data shows the platform is seeing strong traction among investors and developers even as the stock has remained under pressure.

The number of dApps in the ecosystem has jumped to 59, while the total value locked (TVL) has climbed above $500 million, according to DefiLlama. TVL is a widely used gauge of decentralized finance activity, measuring the value of assets deposited across a blockchain's protocols. The biggest protocols on the network include Morpho Blue, Aave, Uniswap, Aerodrome, Argus World, and Archery.

That level of adoption places Arc's TVL ahead of several popular cryptocurrency projects, including Cardano, IOTA, Algorand, and EOS. The network also holds more than $458 million in stablecoins, most of them USDC and EURC — a meaningful figure given that Circle built Arc for real-world asset tokenization.

Trading activity is picking up as well. Decentralized exchanges on Arc have already handled more than $839 million in volume, a figure that could surpass the $1 billion milestone this week, while dApps on the network have generated over $7.2 million in fees since launch.

Arc's momentum mirrors that of Robinhood Chain, the layer-2 network Robinhood launched a few months ago, which has continued to grow and has already attracted billions of dollars in assets — part of a broader push by established finance brands to launch their own blockchain networks.

Circle Internet Group Benefits From Rising Bond Yields

Circle Internet Group is also benefiting from the bond market's performance. The ten-year Treasury yield soared to 5.24%, its highest level in years, while the 30-year and five-year yields rose to 5.5% and 5.06%, respectively. For Circle specifically, the three-month yield has jumped to 4.19%.

The move matters because the company generates revenue by investing its stablecoin reserves in short-term government bonds, making short-term yields a direct driver of its interest income. The GENIUS Act, the U.S. federal stablecoin legislation, prohibits stablecoin issuers from allocating to other assets such as Bitcoin, gold, and corporate bonds.

Rising yields coincide with continued growth in USDC market cap, which has climbed above $75 billion. If current inflows continue, the figure would cross the $80 billion mark in the coming months. One driver of the surge is Circle's recent partnership with Binance, which is already producing results: CoinMarketCap data shows Binance is the most active exchange in USDC trading.

Taken together, these developments suggest Circle's business may continue performing well this year. The average analyst estimate points to third-quarter revenue of $786 million, up 6.3% from a year earlier, with growth of 9.5% expected this year and 24% next year, according to Yahoo Finance data — figures that give readers a yardstick for the company's upcoming third-quarter results.

Technical Picture Shows Some Weakness

Technically, however, Circle's stock displays some weakness. It has formed a diamond reversal pattern, a formation commonly described as a bullish reversal in technical analysis, and is close to filling the gap that formed in August this year — gaps appear when a stock opens away from its prior close, leaving a range where no trading took place. The shares have also printed a bearish divergence, which occurs when the Relative Strength Index (RSI) and the MACD fall while the asset's price rises.

As a result, there is a risk that the stock drops to $78, its lowest level on September 16.

This article is based on reporting originally published by The Market Periodical.