Morgan Stanley’s holdings of Circle surged nearly sixfold, but the firm cut its rating on the crypto firm to "Underweight" and lowered its target price to $38.

Morgan Stanley downgraded Circle (CRCL) stock rating from "Hold" to "Underweight" on August 3, slashing its price target from $106 to $38. Analysts attributed the rating cut primarily to the contraction in USDC circulation, which exposed Circle’s high sensitivity to reserve-related revenue. Meanwhile, the company’s business structure is shifting toward a transaction-based revenue model with lower profit margins. The report also cut Circle’s USDC size forecasts for 2027 and 2028 by approximately 33% and 44% respectively, and projected the company’s GAAP earnings per share (EPS) to be about 3% and 20% lower than market consensus. However, Morgan Stanley’s latest filed 13F document shows that as of June 30, its holdings of Circle shares surged from around 1.46 million to 8.32 million, marking a clear position increase in the second quarter. This means that while Morgan Stanley publicly downgraded Circle’s rating and price target in early August, signaling a cautious outlook, its disclosed holdings as of the end of Q2 showed a significant position increase. It should be noted that 13F filings reflect holdings as of June 30, and cannot reflect whether positions were adjusted before or after the August rating cut. The market’s focus centers on the stark contrast between the institutional research view and the historical holdings disclosure.