JPMorgan has lowered its earnings forecasts for Circle and Coinbase after a new USDC revenue-sharing deal with Hyperliquid changed how revenue from the stablecoin’s reserves will be divided.
Summary
- JPMorgan cut earnings forecasts for Circle and Coinbase after the Hyperliquid USDC deal.
- The bank warned that the new revenue sharing terms could put pressure on stablecoin profit margins.
- Analysts remain divided as higher interest rates may still support USDC earnings growth.
According to a JPMorgan research note, the revised deal could reduce the long-term profitability of the USDC business for both companies, even as they continue to seek greater adoption of the dollar-backed stablecoin.
The bank argued that competition between distribution partners may force issuers to give up a greater proportion of reserve revenue to secure market share.
New revenue sharing conditions reduce reservation revenues
Under the agreement highlighted by JPMorgan, Coinbase will classify USDC held on Hyperliquid as “on-platform” balances. As a result, Coinbase will receive the reserve revenue generated by those deposits, but will return 90% of that revenue to Hyperliquid instead of splitting the profits with Circle under the companies’ existing economic agreement.
JPMorgan estimated that Hyperliquid currently holds around $6 billion worth of USDC, representing approximately 8% of the stablecoin’s circulating supply. Due to the platform’s growing role in the USDC ecosystem, the bank believes that the revised economics could have a notable effect on the future earnings of both Circle and Coinbase.
Describing the competitive dynamics, JPMorgan said both companies face pressure to increase the use of USDC even if doing so requires handing over a greater share of reserve revenue to distribution partners. The bank characterized the situation as one in which efforts to expand adoption could come at the cost of lower profitability.
Concerns about revenue sharing follow an announcement made on May 14, when Circle and Coinbase revealed a association with Hyperliquid to deepen USDC integration across the entire crypto 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 preferred stablecoin, strengthening the platform’s importance within Circle’s distribution network. JPMorgan said the terms of trade underpinning that expansion, rather than the growth in usage itself, have become the main issue for investors assessing future earnings.
Wall Street remains divided on Circle’s prospects
Elsewhere on Wall Street, analysts have reached different conclusions about Circle’s long-term prospects. Mizuho has also taken a more cautious stance on the company, downgrading the stock as concerns grow over whether expanding USDC adoption will continue to drive attractive economics.
In contrast, Bernstein and William Blair have maintained positive ratings for Circle, indicating that they still expect the stablecoin issuer to benefit from continued growth in digital dollar usage despite growing competition for distribution partnerships.
Even after cutting its earnings estimates, JPMorgan said it continues to forecast USDC-related earnings growth through 2027. The bank attributed that expectation to its interest rate outlook, which now includes a 25 basis point Federal Reserve rate increase at the October 2026 meeting.
Higher rates generally increase revenue earned from the cash and Treasury reserves backing USDC, offsetting the revenue sharing concessions outlined in the Hyperliquid agreement.
For investors, the latest debate has shifted attention away from the circulating supply of USDC alone and towards how revenue from reserves is divided among issuers, exchanges and distribution partners. JPMorgan’s analysis suggests that while adoption may continue to increase, the financial value retained by Circle and Coinbase may come under increasing pressure as more platforms negotiate similar trading terms.
