Circle Earnings Beat Could Trigger Short Squeeze, Warns Matrixport Analyst

• Circle stock rose in pre-market trading ahead of earnings.
• Following the listing, shares have declined, hedge funds have increased their short bets, and retail sentiment is still pessimistic.
• Sharp upward shifts and short covering may be triggered by a better-than-expected report, according to the analyst.

Circle Internet Group (CRCL) stock has been in the green as the stablecoin issuer prepares to report fourth-quarter 2025 earnings on Tuesday. 

According to 10x Research data, about 17.8% of Circle’s shares outstanding are currently sold short on Tuesday. This has placed it among the most heavily shorted Bitcoin and crypto-linked stocks. The firm’s “Chart of the Day” report showed that short interest has been rising steadily over the past few months, even as some parts of the broader digital asset equity market have tried to bounce back.

The higher bearish position followed Circle's price dropping after its first surge since being listed in June of last year. Even though they work in the stablecoin sector, which is widely seen as one of the most promising growth areas in digital assets, hedge funds have built up large short positions. The increase in short positions reflected cautious positioning by some investors ahead of the earnings report.

Circle Internet Group (CRCL) was up over 2% in pre-market hours, ahead of the company’s scheduled earnings call in the last 24 hours. On Stocktwits, the retail sentiment around CRCL remained in the ‘bearish’ territory, with chatter at ‘high’ levels over the past day.

Analysts are not expecting a major earnings surprise. However, the high level of short interest could lead to bigger price moves. If Circle reports stronger-than-expected results, possibly supported by growth in stablecoin issuance or higher interest income, short sellers may rush to buy back shares to close their positions. This type of buying can push the stock price up quickly.

Such short-covering rallies have historically led to sharp moves, especially in crypto-related stocks that are closely tied to broader Bitcoin (BTC) sentiment. Separate data from 10x Research showed that other crypto-linked companies, including miners and exchange operators, also carry elevated short ratios. Even so, Circle ranks among the most heavily shortened names in the group. Amid this, if the company reports weaker-than-expected earnings or offers a cautious outlook, the stock may continue to move lower, according to Matrixport.

Read also: Anthony Scaramucci Calls Bitcoin ‘Intellectually Defensive’ Amid Gold Rally

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