Why Circle Internet Stock Is Soaring Today

Shares of Circle Internet Group (NYSE: CRCL) are rising today, up 10.8% as of 1:39 p.m. ET. The jump comes as the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) were up 0.7% and 0.8%, respectively.

The company, which went public earlier this month, is the sole issuer of USDC, one of the most popular stablecoins on the market. Circle stock saw a boost today from news that the Trump administration will allow borrowers to use crypto as assets on their mortgage applications.

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Trump admin wants crypto on mortgage applications

The Federal Housing Finance Agency has ordered Fannie Mae and Freddie Mac to formally consider cryptocurrency as an asset in mortgage loan risk assessments. The directive allows borrowers to retain crypto stored on U.S.-regulated exchanges without converting it to dollars before closing.

The move is a continuation of Trump's pro-crypto agenda, and crypto-related stocks like Circle received a lift.

Image source: Getty Images.

There are some hidden issues with Circle

Investors should keep a few key risks in mind. First, Circle's revenue is closely tied to interest rates, which are currently elevated. If the Federal Reserve lowers rates as anticipated later this year, Circle's top line could be cut by about 10% for every 0.25% rate cut. Second, about half of Circle's revenue goes to Coinbase due to their partnership -- an arrangement that leaves Circle reliant on decisions made outside its own business. With a market cap nearing $55 billion and $1.7 billion in sales last year, Circle stock already has a lot of future growth baked in. I would avoid Circle stock.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool recommends Coinbase Global. The Motley Fool has a disclosure policy.