JPMorgan trims Circle, Coinbase forecasts on Hyperliquid revenue shift
JPMorgan lowered earnings estimates for Circle and Coinbase after a new distribution deal with the fast-growing exchange Hyperliquid exposed a rift in their revenue-sharing model, threatening the long-term economics of the USDC stablecoin.
JPMorgan has cut its earnings forecasts for Circle Internet and Coinbase, citing a revised distribution agreement with Hyperliquid that significantly weakens the revenue generated by the USDC stablecoin. The bank warned that the new terms create a "prisoner's dilemma" for the two companies, incentivizing them to compete against each other for market share at the expense of their own margins.
Hyperliquid, a leading decentralized perpetual futures exchange, has rapidly become a critical distribution channel for USDC. JPMorgan estimates the platform holds roughly $6 billion of the stablecoin, accounting for about 8% of its circulating supply. Under the previous arrangement, Coinbase split the reserve income generated by these balances nearly evenly with Circle.
That structure has now collapsed. Coinbase will classify USDC on Hyperliquid as "on-platform" revenue, retaining just 10% and passing 90% back to the exchange. This effectively cuts Circle out of the income stream from a massive and growing pool of assets. "We think the change in the Hyperliquid relationship showcases the challenge for Circle and Coinbase partnership agreements because it can create 'a prisoner’s dilemma' that drive Coinbase and Circle to compete with each other when promoting USDC distribution," analysts led by Kenneth Worthington wrote in a Tuesday report.
The exchange commands the leverage to demand these terms due to its explosive trading growth. Hyperliquid processed over $150 billion in volume in July alone, capturing 11.5% of Binance's volume. As decentralized venues scale, they can extract better terms from stablecoin issuers and centralized exchanges desperate for liquidity.
The revenue hit compounds existing structural pressures for Circle. USDC's circulating supply has contracted to roughly $73 billion from nearly $80 billion in March, part of a broader $10 billion shrinkage in the total stablecoin market since May. This decline persists even as broader market activity shows signs of life, with centralized exchange spot volume climbing 15.3% to $1.11 trillion in June and real-world asset perpetual volumes hitting a record $311 billion.
JPMorgan factored the Hyperliquid headwinds alongside weaker crypto asset prices into its estimate cuts. While the bank expects higher interest rates to eventually support USDC-related revenue, the immediate outlook is pressured. Separately, Mizuho noted that Circle's recent regulatory approval to establish a national digital currency bank is a positive milestone, but cautioned that investors may be overestimating its near-term financial impact.
