Circle recently went public via an initial public offering (IPO) with a stunning 168% spike on its IPO day, pushing its valuation over $22 billion. However, this has not convinced everyone that the rally is going to continue.
The IPO went live on Thursday, June 5, 2025, on the NYSE under the ticker ‘CRCL’. On the first day of trading, the stock quickly surged past $100 before settling around $87.76. Despite this excitement, some analysts remain cautious about whether the high valuation truly reflects Circle’s financial health.
Analyst Offers Bearish Warning on CRCL
Dom Kowk, a former Goldman Sachs investment banker and co-founder of EasyA, has publicly stated that he believes CRCL “is a great short” at these IPO levels.
Kwok is most concerned about Circle’s financial foundation. Even with the high valuation, Circle had only $65 million of net income in Q1 2025. That is more concerning, as 99% of it is interest income generated by reserves supporting its USDC stablecoin. This implies that if interest rates fall, Circle’s revenue would suffer significantly.
Yet another significant point made by Kwok is the IPO “pop” phenomenon, a phenomenon he is familiar with from his experience as an investment banker. He explained, “As we just witnessed with Circle’s 168% pop, this sudden spike in price generates gigantic enthusiasm and bullish sentiment toward the company.”
He explained that investment banks often engineer a large first-day price jump to generate buzz and attract retail investors. Nonetheless, this can also lead to inflated valuations that correct over time. Kwok cautions investors to “wait 90–180 days” after the IPO, when the “lock-up period” ends and insiders are allowed to sell their shares.
Even the Circle’s own S-1 filing confirms that insiders are barred from selling their shares until either 180 days post-IPO or the second trading day after Q3 2025 earnings, whichever comes first. Some employees may be allowed to sell 15% of their shares after Q2 earnings, but the bulk of insider sales will likely hit later this year.
Is a Short Squeeze Possible for Circle Stock?
Interestingly, while Kwok’s warning is bearish, it may also set the stage for a short squeeze. Now, if lots of investors begin shorting the Circle stock, betting that it will decline, the level of short interest increases.
However, if an unexpected situation happens, such as strong earnings or positive news, the price could increase instead. Then, all of those individuals who wagered against the stock could rapidly buy it back to prevent a loss. It can drive the Circle stock price up unprecedentedly, which is known as a short squeeze.
So even though the analyst is warning the stock could drop, if too many people follow that advice, it might actually lead to a big price jump. That’s why some are wondering if Circle stock could be the next short squeeze.
Also Read: BREAKING: Gemini Exchange Files for IPO After Circle’s NYSE Debut
