Circle (CRCL), profitability eroded even with interest rate cuts... When will the $85 resistance be broken?

▲ Circle, USDC, Stablecoin, Dollar (USD)/ChatGPT generated image

Ahead of the announcement of the US August core Personal Consumption Expenditures (PCE) price index, Circle Internet Group (CRCL) stock price is attempting to break through the $85 resistance level, rebounding in pre-market trading.

According to CoinGape, a cryptocurrency specialized media outlet, on September 30 (local time), Circle Internet Group's stock price showed a 0.88% increase in pre-market trading ahead of the release of the August core Personal Consumption Expenditures price index. Market economists expected the August core PCE inflation rate to record 3.3% year-on-year, the same as the previous figure. Month-on-month, it is projected to rise by 0.3%, with a strong possibility of exceeding the previous month's increase of 0.2%.

Depending on the inflation data results, the Federal Reserve's (Fed) monetary policy path and the direction of the risk asset market are expected to fluctuate significantly. If the core PCE inflation rate exceeds 3.3%, concerns about prolonged high interest rates will reignite, potentially leading to strong selling pressure across virtual assets and stock markets. Conversely, if inflation deceleration is confirmed by a figure below 3.3%, the market is expected to stage a strong rebound rally.

Circle Internet Group's performance structure is intricately linked with the direction of interest rates, complicating investors' calculations. The company generates its primary revenue through the management of reserve assets for the stablecoin USDC, thus the return on these reserve assets critically impacts financial performance. While a benchmark interest rate cut acts as a positive factor invigorating overall investment sentiment in virtual assets, analysis suggests it could also be a double-edged sword, eroding profitability by lowering interest rates on reserve assets.

From a technical analysis perspective, Circle Internet Group's stock price has formed a short-term support zone between $83.60 and $83.70, where the pre-market low and the previous day's closing price converge. If the stock price maintains the $84 level and breaks above the $84.43 resistance, it could test the $85 breakthrough, and with additional buying interest, the upside could extend to $85.80 and the round number resistance of $86. Conversely, if it fails to defend the support level, the stock price could fall to $83.50, damaging the rebound trend, making volatility management crucial in response to inflation data shocks.

[Article Key Summary]

-Circle Internet Group's stock price rebounded by 0.88% in pre-market trading ahead of the announcement of the August core PCE price index.

-Experts have presented an annual core PCE forecast of 3.3% and are closely monitoring changes in monetary policy based on this figure.

-A structural dilemma has been raised: while interest rate cuts are positive for investment sentiment, they are negative for interest income from USDC reserve assets.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*