Circle Stock Price Tumbles 17% After Losing Spot in Major Russell Growth Indexes

Circle stock fell by 17% at the close of trading hours on Tuesday. This comes as the crypto firm behind USDC lost its place in several major Russell Growth indexes.

The company's core business remains unchanged, but this development has raised concerns about future investor demand and market visibility. The crash also comes as a coalition of more than 140 companies unveiled a new rival stablecoin called OpenUSD.

Circle stock hit by Russell Index removal

According to Simply Wall St, these changes were made effective after the U.S. market closed on June 26. The updated index memberships then took effect on June 29. The affected benchmarks include the Russell 1000 Growth Index, Russell 3000 Growth Index, Russell 3000E Growth Index, Russell Midcap Growth Index, and Russell Small Cap Comp Growth Index.

FTSE Russell, which manages the indexes, recently moved to a semi-annual review process. Companies were evaluated based on factors such as market cap, trading activity, and growth characteristics during the reviews. Circle failed to qualify for several growth-focused indexes.

This is important because Russell indexes influence trillions of dollars in investment funds. Many ETFs and passive funds usually buy or sell stocks based on index membership.

Funds holding CRCL through these indexes are now reducing or completely selling their positions. This created pressure on its price that has little to do with the company's business performance. Experts also highlighted that reduced index exposure could affect liquidity over time.

Competition in stablecoins adds more pressure

The decline can also be attributed to the new stablecoin revealed on Tuesday. The rival stablecoin, Open USD, was launched with the backing of over 140 companies. The group includes major names like Visa, Mastercard, BlackRock, Aptos Labs, Solana, Ripple, and even Coinbase, one of Circle's biggest partners.

Open Standard, the company behind Open USD, says the new stablecoin looks to provide a more open and lower-cost alternative for global payments.

After the news, the decline grew steeper. According to market data, the shares ended Tuesday’s trading session at $62.59. Notably, over the last month, Circle stock had fallen by 44%, while its year-to-date loss was 21%.

Circle still maintains its place as a top stock in the market. Just yesterday, Cathie Wood’s ARK Invest boosted its holdings in the stock. The firm’s USDC stablecoin currently has a market cap of around $73 billion, still the second-largest stablecoin globally. It trails USDT, which has a market cap of approximately $185 billion, according to DeFiLlama data.

Source: DeFiLlama

The index removal may continue to create short-term selling pressure as funds rebalance their portfolios. The competition from the new stablecoin project, on the other hand, has already built up a cautious view from investors regarding future market share growth.