Shares of Circle Internet Corp. (CRCL) plummeted 8% in morning trading on Tuesday, as investors reacted to a significant analyst downgrade and ongoing regulatory uncertainties in the stablecoin sector.

The sharp decline was primarily triggered by Compass Point's decision to downgrade Circle Internet from Neutral to Sell, while also slashing its price target from $205 to $130. This bearish outlook from a respected financial institution likely prompted many investors to reassess their positions in the company, leading to the pre-market sell-off.

Adding to the downward pressure, the stablecoin industry faces potential regulatory challenges despite recent legislative progress. The passage of the GENIUS Act, which establishes a federal regulatory framework for USD-backed stablecoins, has created a more uniform structure but also raised questions about how crypto firms like Circle will navigate the new landscape. The ongoing uncertainty surrounding the Federal Reserve's stance on granting master accounts to crypto firms, as highlighted in recent reports, may be contributing to investor caution.