Arca Sells Circle Shares After IPO Dispute, Shifts Focus to USDT Amid Stablecoin Market Tensions
Crypto investment firm Arca has divested its Circle (CRCL) shares following dissatisfaction with Circle’s IPO allocation, receiving only a fraction of its requested $10 million stake. Arca’s Chief Investment Officer, Jeff Dorman, criticized Circle for prioritizing traditional finance over crypto-native investors, underscoring tensions between digital asset firms and established financial institutions over fair access to major crypto listings. In response, Arca has repositioned towards Tether (USDT), citing USDT’s superior market capitalization and liquidity. On June 7, 2025, Circle’s USDC stablecoin experienced a notable 1.97% price decline and a 45.98% drop in trading volume, sparking concerns over USDC’s market stability and investor confidence. Industry observers highlight that Arca’s move might prompt institutional investors to reassess stablecoin preferences, potentially undermining USDC and reinforcing USDT’s dominance. The controversy around Circle’s IPO process, reminiscent of earlier events like the Coinbase IPO, illustrates ongoing challenges for crypto-native firms and could impact stablecoin market dynamics. Crypto traders should closely monitor these developments, as shifts in stablecoin flows and IPO practices may influence both short- and long-term market sentiment and asset valuations.
Bearish
Arca’s sell-off of Circle shares following an unsatisfactory IPO allocation signals eroding confidence among key crypto-native institutional investors in Circle and its USDC stablecoin. The public confrontation and shift in backing toward USDT highlight both dissatisfaction with Circle’s post-IPO capital strategy and concerns over USDC’s decreasing market metrics—specifically, a drop in USDC prices and trading volume. This scenario is likely to compound negative sentiment, trigger shifts in institutional capital flows towards USDT, and potentially weaken USDC’s market position at least in the short term. Similar historical precedents, such as early investor sell-offs post-IPO and public disputes over allocation, have tended to result in increased volatility or market share loss for the affected asset. While long-term impacts depend on Circle’s response, the current outlook is bearish for USDC, as the episode underscores competitive threats and market instability in the stablecoin sector.