$Circle(CRCL.US) recently plummeted from a high of nearly HK$300, dropping 15.5% in a single day on Tuesday and dipping slightly after hours, bringing its market cap back down to $54 billion. Seeing such a dramatic drop, everyone in the Longbridge community is asking whether it can still rebound.

Looking back at the recent trend, CRCL started a multi-day rally on June 18, with trading volume skyrocketing to $26.4 billion in a single day and a turnover rate nearing 60%. Clearly, it was overhyped, with a flood of capital chasing short-term gains—so a pullback is normal. But that doesn’t mean CRCL’s run is over! In fact, understanding CRCL comes down to three risks, and as of now, I don’t see any real danger—so where’s the talk of a reversal coming from?

First, regulatory risk. Yesterday, the Bank for International Settlements (BIS) released a report highlighting the risks of stablecoins, but these concerns aren’t new. On the contrary, Circle itself has high transparency in reserves and fairly standardized management. Moreover, U.S. regulatory direction on stablecoins is gradually becoming clearer, which is a long-term positive, not a negative. The BIS represents traditional financial institutions and has its own agenda—we should take their words with a grain of salt.

Second, overreliance on interest margins? Some say Circle is like a bank that can’t lend, with interest income as its main revenue source (by investing reserve funds in interest-bearing assets). So if the U.S. cuts rates, wouldn’t that hurt its profits? But in reality, the Fed is expected to cut rates only moderately, not drastically, and Circle is expanding into new businesses like payments and settlements, not just relying on interest margins. On the other hand, rate cuts could boost demand for stablecoins, potentially increasing circulation.

Third, and most importantly—the risk of a confidence crisis. The biggest pillar for stablecoins is reserves, and the market worries about a run if problems arise. But the reality is, 90% of Circle’s USDC assets are in government money market funds managed by BlackRock, with custody by BNY Mellon, making them highly secure. Barring an extreme black swan event, the likelihood of a large-scale loss of confidence is low.

In short, CRCL’s party isn’t over. I’m no prophet and can’t give a target price, but judging by the momentum, CRCL is just cooling off after overheating—time to find a seat and wait.