Shares of stablecoin issuer Circle Internet Group fell sharply Thursday following a Wall Street downgrade and reports tied to a legal probe connected to a recent crypto exploit.

Circle’s stock price closed near session lows in Nasdaq trading, falling 9.9% to $85.10.

The decline adds to a broader slide in the company’s shares, which are down nearly 24% over the past month and about 43% over the past six months, reflecting continued volatility after Circle’s high-profile public debut last year.

However, the latest pullback may also reflect profit-taking after Circle shares surged between February and March, driven largely by growing stablecoin adoption.

Nevertheless, some analysts are urging caution. On Thursday, Compass Point downgraded Circle to “sell” from “neutral” and issued a $77 price target, implying roughly 9% downside from current levels.

Circle has also faced pressure from regulatory uncertainty in the United States. Progress on market structure legislation has stalled, while banking industry groups continue to lobby against yield-bearing stablecoins.

Analysts at Bernstein said the concerns are overstated, noting that Circle’s underlying business remains unaffected and pointing to growing USDC 

USDC$1adoption and strong reserve income.

Fallout from Drift Protocol exploit continues to weigh on crypto markets

Separately, legal scrutiny tied to the recent exploit of decentralized exchange Drift Protocol has added another layer of uncertainty to the broader crypto market, indirectly weighing on sentiment toward Circle.

According to a notice circulated this week, investors affected by the $280 million Drift exploit are being urged to contact the Oakland, California, law firm Gibbs Mura for potential financial recovery. The outreach signals the early stages of a possible class-action investigation tied to losses from the incident.

While Circle is not directly implicated in the exploit, the episode has renewed concerns about counterparty risk and the stability of decentralized finance platforms — an overhang that can spill over into publicly traded crypto-linked equities.

The perpetrator of the Drift exploit moved the stolen assets into USDC, prompting speculation over whether the funds could have been frozen by Circle, though no action was taken.