JPMorgan trims Circle and Coinbase on a USDC squeeze

JPMorgan flags a structural shift in USDC economics

JPMorgan has lowered its earnings forecasts for @circle and @coinbase, warning that a new revenue-sharing agreement with Hyperliquid is weakening the economics behind $USDC. Circle and Coinbase announced the partnership with Hyperliquid in May to expand $USDC adoption. Hyperliquid operates as both a Layer-1 blockchain and a decentralized exchange for spot and derivatives trading, and as of June 11, $USDC became the preferred stablecoin on the platform.

Under the new structure, @coinbase classifies any $USDC on Hyperliquid as "on-platform," earning all associated reserve income but paying 90% of the float back to Hyperliquid. Hyperliquid holds roughly $6 billion in $USDC, representing about 8% of the stablecoin's circulating supply, according to JPMorgan estimates. JPMorgan estimated @coinbase previously split nearly all of that revenue evenly with @circle.

@jpmorgan said the arrangement creates a "prisoner's dilemma" that encourages @circle and @coinbase to compete for $USDC distribution at the expense of their own revenue. Even if $USDC becomes more widely used, the profit margins for @coinbase and @circle could still shrink.

Market impact and broader pressure on the stablecoin pair

JPMorgan cut its price target for @coinbase from $283 to $196 after saying the new partnership involving $USDC could reduce revenue in the near term. The bank said the full impact of the Hyperliquid relationship will not appear in second-quarter results but will be incorporated in the second half of 2026.

Previous estimates from Compass Point suggested the agreement could redirect between $135 million and $160 million in annual reserve income toward Hyperliquid, with the combined annual earnings of @circle and @coinbase potentially falling by between $60 million and $80 million.

$USDC's circulating supply has fallen to about $73 billion from nearly $80 billion in March, part of a broader $10 billion contraction in the stablecoin market since May as crypto trading activity cooled and new regulated rivals chipped away at the dominance of $USDC and Tether's USDT. Hyperliquid, meanwhile, processed more than $150 billion in trading volume during July, with its volume relative to Binance reaching 11.5%, making it an increasingly important distribution channel for $USDC, according to @jpmorgan.

The broader takeaway is a structural one: as platforms like Hyperliquid grow, the economics of stablecoin distribution are being renegotiated. Growing competition is forcing stablecoin companies to share more reserve income with exchanges and payment platforms. The platforms holding the coins are increasingly the ones capturing the yield.

Sources:
CoinDesk: JPMorgan sees Hyperliquid partnership weighing on Circle, Coinbase
Yahoo Finance: JPMorgan cuts estimates for Circle and Coinbase on Hyperliquid pressure
CryptoNews: JPMorgan warns Hyperliquid's growth threatens Circle's USDC economics