JPMorgan cut its earnings forecasts for Circle and Coinbase after a new USDC revenue-sharing agreement with Hyperliquid changed how income from stablecoin reserves is split.
summary
- JPMorgan cut earnings forecasts for Circle and Coinbase after Hyperliquid USDC deal.
- The bank warned that new revenue-sharing terms could put pressure on stablecoin profit margins.
- Analysts remain divided as higher interest rates may continue to support USDC earnings growth.
According to a research note from JPMorgan, the revised agreement could reduce the long-term profitability of the USDC business for both companies, even as they continue to seek higher adoption of the dollar-backed stablecoin.
The bank said competition between distribution partners may force exporters to give up a larger share of reserve income to secure market share.
The new revenue-sharing terms reduce reserve income
Under the arrangement highlighted by JP Morgan, Coinbase will classify USDC held on Hyperliquid as “on-platform” balances. As a result, Coinbase will receive the reserve income generated by those deposits but will return 90% of that revenue to Hyperliquid rather than splitting the proceeds with Circle under the companies’ current economic arrangements.
JPMorgan estimated that Hyperliquid currently owns about $6 billion worth of USDC, which represents about 8% of the stablecoin’s circulating supply. Given the platform’s growing role in the USDC ecosystem, the bank believes the revised economics could have a notable impact on the future earnings of both Circle and Coinbase.
Describing the competitive dynamic, JPMorgan said the two companies face pressure to increase USDC usage even if that requires giving up a larger portion of reserve revenue to channel partners. The bank described a situation where efforts to expand adoption could come at the cost of reduced profitability.
Concerns about revenue sharing follow an announcement on May 14, when Circle and Coinbase revealed a partnership With Hyperliquid to deepen USDC integration across cryptocurrency trading platform. Hyperliquid operates both a Layer-1 blockchain and a decentralized exchange offering spot and perpetual futures markets.
Since June 11, USDC has become Hyperliquid’s stablecoin of choice, cementing the platform’s importance within the Circle distribution network. The business terms supporting this expansion, rather than growth in usage itself, have become the key issue for investors evaluating future earnings, JPMorgan said.
Wall Street remains divided on Circle’s outlook
Elsewhere on Wall Street, analysts reached different conclusions about Circle’s long-term prospects. Mizuho also took a more cautious stance on the company, downgrading the stock as concerns grow over whether expanding USDC adoption will continue to generate attractive economics.
By contrast, Bernstein and William Blair maintained positive ratings on Circle, indicating that they still expect the stablecoin issuer to benefit from continued growth in the use of the digital dollar despite increasing competition for distribution partnerships.
Even after cutting its earnings estimates, JPMorgan said it continues to expect US dollar-linked earnings growth through 2027. The bank attributed this expectation to its interest rate outlook, which now includes a 25 basis point Fed rate increase at its October 2026 meeting.
Higher rates generally increase income earned from cash and treasury reserves backing USDC, providing compensation for the revenue-sharing concessions outlined in the Hyperliquid Agreement.
For investors, the recent debate has shifted attention away from the circulating supply of US dollars alone towards how reserve income is divided between issuers, exchanges and distribution partners. JPMorgan’s analysis suggests that while adoption could continue to rise, the financial value held by Circle and Coinbase may come under increasing pressure as more platforms negotiate similar commercial terms.
