Fall of 'Circle', Retail Investors' 'Favorite Stock'… Called a 'Lottery', Then Plunged 30% in Two Days, Why?
In June, **'Circle'**, the stablecoin issuer, which was the most bought stock by Korean retail investors (domestic overseas stock investors) and surged over 750% after listing, being called a 'new lottery', **plunged nearly 30% in two days**. Investors who jumped on the rosy expectations of 'Won stablecoin' legalization are experiencing a dizzying ride of 'coming in fast and going out fast'. What exactly happened to Circle? We deeply analyzed the reasons for the sharp decline, dividing them into 3 categories.
1. Reconstruction of the Event: 750% Surge and Two Days of Plunge
First, let's retrace the dramatic roller coaster of Circle's stock price.
- Surge: On June 5th, Circle's stock, listed at an IPO price of USD 31, surged to a **high of USD 263.45 on the 23rd, recording an astonishing 749.84% increase**.
- Plunge: However, the glory was short-lived. Following a -15.29% drop on the 24th (Tuesday), it further declined by **-10.79%** on the 25th (Wednesday), plunging **over 26%** from its peak in just two days, even breaking the USD 200 mark.
2. Reason for Plunge ①: 'Cold Warnings' from Investment Banks and International Organizations
What poured cold water on the heated market atmosphere were the successive warnings from credible institutions.
- Jefferies' Skeptical Report: "It is highly skeptical whether stablecoins will replace the current highly rewarding card system and become a mainstream payment method in the US."
- Bank for International Settlements (BIS) Pointed Out: "Stablecoins do not fully guarantee parity with the dollar and have a high possibility of being misused for illegal activities such as money laundering."
Both institutions commonly evaluated that stablecoins do not meet the core requirements of 'currency', raising fundamental questions about their future value.
3. Reason for Plunge ②: 'Money Tree Sister' Cathie Wood's Profit Realization
What fueled the market's anxiety was the movement of 'Money Tree Sister' Cathie Wood.
Ark Invest, led by Cathie Wood, was an early investor who purchased a large volume of Circle stock on its first day of listing. However, as the stock price surged, they aggressively moved to realize profits by **selling approximately 1.5 million shares worth about ₩460 billion over the past 4 trading days**.
The news that a 'star investor' leading the market engaged in large-scale selling acted as a strong sell signal to other investors, indicating that 'the party is over'.
4. Korean Retail Investors Who Piled into the 'Most Popular Stock' Are 'Stuck'
The reason this plunge is even more painful is that Circle was the **No. 1 US stock most net-purchased by domestic investors in June**. According to the Korea Securities Depository, Korean retail investors net-purchased Circle stock worth a whopping **approximately ₩602.3 billion** over 15 trading days. Many domestic investors who belatedly joined the 'lottery' craze are feared to have suffered significant losses from this plunge.
End of a Heated Festival?…Importance of Prudent Investment
This Circle incident is a typical example of how risky a stock that surges solely on 'expectations' can be. In particular, investment in newly listed tech stocks that bet on future potential rather than clear performance can be greatly shaken by an unexpected negative factor like this. It is important to keep this in mind.
- What do you think of the 30% plunge of 'Circle', the No. 1 net-purchased stock by Korean retail investors, in two days?
- Which do you think had a greater impact on the stock price decline: Cathie Wood's selling or the warnings from international organizations?
- Through this incident, what did you learn about the risks of 'blind investment' and the importance of prudent stock analysis? Please share your opinion.
It reminds us once again that in the world of investment, there is no 'eternal rise' or 'absolute jackpot'.