Citi has signaled a more guarded outlook for some firms tied to digital assets after concluding that momentum on U.S. crypto legislation has stalled. The bank cited ongoing debates among lawmakers and industry stakeholders over provisions in the proposed CLARITY Act - most notably discussions around incentives for stablecoins - as a key reason for the more cautious tone.
In its assessment, Citi noted there remains a possibility that a revised bill could be produced by late March. However, the brokerage added that if passage slips into April or May, lawmakers may need to accept compromises to secure approval.
Against that backdrop, Citi reiterated its top stock preferences within the sector: Circle Internet Financial and Bullish. The bank said Circle stands to benefit if stablecoins such as USDC see broader adoption outside of crypto trading into payments and what it described as automated, or "agentic," commerce. Bullish was highlighted for gaining traction with U.S. institutional clients, a trend supported by recent strong trading volumes.
At the same time, Citi downgraded Gemini to Sell, expressing concern about the company's prospects for achieving sustainable profitability following recent restructuring and its decision to exit some international markets. The brokerage lowered its price target for Gemini to $5.50 from $13.00, citing competitive pressures and softer crypto market conditions that could constrain the company's ability to scale.
In addition to the Gemini downgrade, Citi trimmed price targets across a number of crypto-linked equities after revising down its price forecasts for major digital assets. The bank now expects Bitcoin to reach $112,000, down from a prior projection of $143,000, and it adjusted valuations for firms including MicroStrategy and Riot Platforms in light of the softer crypto assumptions.
"Despite positive rhetoric from some industry players, legislative momentum for CLARITY remains stalled as stakeholders continue to debate key items. There’s still chance for a new markup by late March with the stated goal post remaining April/May for passage, though this might involve some compromise on the key debate of stablecoin rewards," analysts at Citi said.
Citi warned that slower legislative progress combined with less bullish crypto price assumptions could weigh on sentiment in the near term, even while it maintained that longer-term themes such as tokenization and the adoption of stablecoins remain intact. The brokerage preserved company-specific preferences where it sees durable drivers, while taking a more conservative stance where regulatory and market uncertainty is more acute.
Summary
Citi says U.S. crypto legislation is losing momentum and that this, together with reduced price forecasts for Bitcoin and Ethereum, has led the bank to downgrade certain crypto-linked equities and lower price targets. The firm reiterated select picks it views as having company-specific strengths.
Key points
- Citi views progress on the CLARITY Act as stalled amid debate over key provisions, including stablecoin incentives.
- The bank kept Circle and Bullish as preferred names for company-specific reasons tied to stablecoin adoption and institutional traction, respectively.
- Citi downgraded Gemini to Sell and cut its price target to $5.50 from $13.00, and it reduced crypto price forecasts—Bitcoin to $112,000 from $143,000—leading to lower valuations for some firms.
Risks and uncertainties
- Uncertain legislative timing for the CLARITY Act could negatively affect regulatory clarity and near-term market sentiment - affecting crypto exchanges, stablecoin issuers, and related financial services.
- Softer price assumptions for Bitcoin and Ethereum may reduce valuations and investor appetite for crypto-linked equities such as MicroStrategy and Riot Platforms.
- Competitive pressures and market conditions could limit the ability of some exchanges, exemplified by Gemini, to achieve sustainable profitability following restructuring and international market exits.