Circle Internet Group (CRCL) shares have rebounded over the past several sessions, rising from a year-to-date low of $58.50 to approximately $71. The recovery comes as market expectations for the passage of the CLARITY Act have improved. However, the stock faces mounting headwinds ahead of its second-quarter earnings report expected in August, with declining USDC supply weighing on the outlook.

CLARITY Act Prospects Lift Sentiment

Traders on Polymarket are increasingly betting that the CLARITY Act will be signed into law in 2026. Probability odds on the platform have climbed to 47%, up from a low of 32% earlier in July.

Circle stands out as one of the primary beneficiaries should the legislation advance, given its position as the second-largest stablecoin issuer globally, trailing only Tether Holdings. The CLARITY Act aims to streamline cryptocurrency regulation by dividing oversight responsibilities between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Under the proposed framework, the CFTC—widely viewed as the more industry-friendly regulator—would serve as the primary overseer, while the SEC would retain authority over digital assets classified as securities.

The bill also seeks to define digital commodities and address the stablecoin yield question. Following extended negotiations, banking and crypto industry participants reached a compromise that prohibits interest-like stablecoin yields while permitting certain types of rewards. For stablecoin issuers, clearer rules could affect reserve management, product design, and relationships with banks and payment partners, making the bill a key policy variable for Circle beyond near-term trading sentiment.

USDC Supply Contracts as Bond Yields Rise

Despite the legislative tailwinds, Circle's stock remains under pressure as the company prepares to release its financial results next month. The most pressing concern is the continued contraction in USDC supply, which has fallen to $73.17 billion—its lowest level since February. The stablecoin has been in a sustained downtrend after reaching a peak of approximately $80 billion earlier this year. Circle's euro-backed stablecoin, EURC, has experienced a similar trajectory, with its market capitalization declining to $437 million from a year-to-date high of $467 million.

The contraction in stablecoin supply during the ongoing crypto downturn is significant because it directly impacts Circle's revenue growth potential, as the company earns interest on reserves backing its tokens. Stablecoin supply is also closely watched as a measure of dollar liquidity within crypto markets, since tokens such as USDC are used for trading, settlement, and transfers across exchanges and blockchain networks.

On a more favorable note, U.S. Treasury yields have risen amid escalating tensions between the United States and Iran. The two-year yield reached 4.25%, just below its year-to-date high of 4.297%, while the one-year yield advanced to 4.073%. Whether the benefit from higher yields will be sufficient to offset declining asset levels remains an open question, and investors will be looking for management commentary on reserve income, circulation trends, and operating costs when results are released.

Analyst Estimates and Price Target Revisions

The next major catalyst for CRCL shares is the company's second-quarter earnings report. According to Yahoo Finance data, the consensus revenue estimate stands at $720 million, representing a 9.48% year-over-year increase. While positive for a cryptocurrency firm during a market downturn, this growth rate trails that of many major technology companies.

Several analysts have recently adjusted their price targets downward. Ed Engel of Compass Point set a target of $62, below the current trading price. David Koning at Baird reduced his target from $138 to $100, and Goldman Sachs lowered its projection from $111 to $96. The reductions underscore the market's focus on whether Circle can sustain revenue growth if token circulation remains below earlier-year levels.

Technical Outlook

On the daily chart, Circle stock has formed a double-top pattern at $136.45 with a neckline at $84.57, corresponding to its April low. The share price has remained below the 50-day Exponential Moving Average (EMA). The Average Directional Index (ADX) has declined to 20, its lowest reading since June 8, suggesting the current downtrend is losing momentum.

Based on the technical pattern, the stock may resume its downward trajectory toward a key support level at $50. A move above resistance at $85 would invalidate the bearish outlook.