Mizuho cuts Circle target to $50 on OpenUSD margin risk
Mizuho downgraded Circle to underperform and slashed its price target, warning that a new competitor's yield-sharing model will force the stablecoin issuer to surrender its lucrative reserve income to distributors.
Mizuho downgraded Circle to underperform from neutral and cut its price target to $50 from $85. Shares fell 0.6% to $62.63. The bank warned that OpenUSD, a stablecoin unveiled June 30 by a consortium of over 140 partners including Mastercard, Stripe, Coinbase and BlackRock, threatens Circle's business.
Circle generates revenue by retaining a large portion of the yield on its USDC reserves before sharing a cut with partners. OpenUSD operates differently by charging only a small operating fee and passing most of the reserve yield directly to issuers and distributors. Analysts led by Dan Dolev noted this structure "could fundamentally alter CRCL's business model, which relies on retaining a large portion of the treasury yield to drive revenues."
This competitive shift arrives at a vulnerable time. Circle must renegotiate its revenue-sharing agreement with Coinbase, its largest distribution partner, in August. Because Coinbase is a supporter of OpenUSD, Mizuho argued the exchange now holds the leverage to demand a larger share of USDC reserve income.
Mizuho adjusted its financial model to reflect this pricing pressure. The bank raised its estimate for Circle's distribution and transaction costs in 2027 to 73% from 64%. It cut its adjusted EBITDA forecast for that year to $699 million from $1.09 billion, a figure roughly 25% below the Wall Street consensus of $941 million.
The downgrade highlights broader stress for USDC. Its circulating supply has dropped to about $73 billion from nearly $80 billion in March, part of an approximate $10 billion contraction in the overall stablecoin market since May. JPMorgan added to the negative sentiment, noting that Hyperliquid's recent deal with Circle and Coinbase creates a "prisoner's dilemma" that could further squeeze USDC economics.
For investors, the core concern is that a structural reset in how stablecoin yields are distributed will erode Circle's profitability. Even if interest rates remain higher than expected in 2027, Mizuho concluded the resulting boost to reserve yields would not offset the margin compression. At $62.63, Circle shares still trade well above the new $50 price target, indicating the market is still weighing the severity of the OpenUSD threat.
