JPMorgan has revised its earnings forecasts for Circle and Coinbase due to a new USDC revenue-sharing agreement with Hyperliquid, which modifies how income from the stablecoin’s reserves is divided.
Summary
- JPMorgan has reduced its earnings predictions for Circle and Coinbase as a result of the Hyperliquid USDC agreement.
- The bank has warned that these new revenue-sharing arrangements may affect the profit margins associated with stablecoins.
- Analysts are divided, as the potential for rising interest rates could still support USDC earnings growth.
A note from JPMorgan highlights that the adjusted agreement may reduce the long-term profitability of the USDC initiative for both companies, despite their efforts to enhance the adoption of the dollar-backed stablecoin.
The bank pointed out that competition among distribution partners may force issuers to surrender a larger percentage of reserve income to safeguard market presence.
New revenue-sharing structure affects reserve income
According to JPMorgan, the new deal permits Coinbase to treat USDC held on Hyperliquid as “on-platform” balances. As a result, Coinbase will receive the reserve income generated from these deposits but is obliged to return 90% of that revenue to Hyperliquid, rather than sharing it with Circle as per their prior economic agreement.
JPMorgan estimated that Hyperliquid currently oversees around $6 billion in USDC, representing roughly 8% of the stablecoin’s circulating supply. Considering Hyperliquid’s growing role in the USDC ecosystem, the bank believes these updated terms could notably influence future revenue streams for both Circle and Coinbase.
In discussing the competitive landscape, JPMorgan observed that both firms face pressure to enhance USDC adoption, even if it necessitates giving up a larger share of reserve income to distribution partners. The bank characterized the scenario as one where efforts to stimulate adoption may result in diminished profitability.
These revenue-sharing concerns surfaced following an announcement on May 14, when Circle and Coinbase revealed a collaboration with Hyperliquid to improve USDC integration across the trading platform. Hyperliquid operates a Layer-1 blockchain and a decentralized exchange that offers both spot and perpetual futures markets.
Since June 11, USDC has been designated as Hyperliquid’s preferred stablecoin, thereby elevating the platform’s significance within Circle’s distribution model. JPMorgan noted that the commercial terms driving this growth, rather than merely the increase in usage, have emerged as the principal concern for investors evaluating future earnings.
Diverse opinions on Circle’s future on Wall Street
On Wall Street, analysts have drawn various conclusions about Circle’s long-term prospects. Mizuho has adopted a more cautious stance regarding the company, downgrading its stock due to concerns over whether increasing USDC adoption will preserve financially favorable economics.
In contrast, Bernstein and William Blair maintain optimistic ratings for Circle, suggesting they still expect the stablecoin issuer to benefit from ongoing growth in digital dollar usage, even amid heightened competition for distribution partnerships.
Despite lowering its earnings forecasts, JPMorgan has indicated that it still anticipates growth in USDC-related earnings through 2027. The bank attributed this optimistic outlook to its interest rate projections, which now include a 25-basis-point increase by the Federal Reserve at the October 2026 meeting.
Higher interest rates typically boost income generated from the cash and Treasury reserves backing USDC, which could help offset the revenue-sharing compromises outlined in the Hyperliquid agreement.
For investors, the recent discussions have shifted focus from USDC’s circulating supply alone to the distribution of reserve income among issuers, exchanges, and distribution partners. JPMorgan’s analysis implies that while adoption might continue to grow, the financial returns retained by Circle and Coinbase could face increasing strain as more platforms negotiate similar commercial terms.
