JPMorgan cuts Circle and Coinbase forecasts as Hyperliquid pact reshapes USDC economics
Bank warns revised revenue-sharing deal with Hyperliquid forces both firms into a costly trade-off to defend USDC's market share.
JPMorgan has cut its earnings forecasts for Circle and Coinbase, warning that a revised revenue-sharing arrangement between the two companies and the decentralised exchange Hyperliquid will erode profitability from the USDC stablecoin even as it accelerates the token’s adoption. The bank’s research note, described by both TokenPost and crypto.news, frames the deal as a structural shift in how income from USDC reserves is divided.
Under the new terms, Coinbase will treat USDC held on Hyperliquid as an “on-platform” balance. That reclassification allows Coinbase to collect reserve income first, before passing 90% of that revenue back to Hyperliquid, rather than splitting it with Circle under the previous arrangement. JPMorgan estimates Hyperliquid currently holds roughly $6 billion in USDC — around 8% of the stablecoin’s total circulating supply — making the change financially material for all three parties.
A “prisoner’s dilemma” for stablecoin issuers
JPMorgan characterised the arrangement as a “prisoner’s dilemma”: Circle and Coinbase are being compelled to surrender a larger share of reserve income in order to keep USDC competitive on decentralised platforms, even though doing so squeezes their own margins. The bank’s analysts concluded that while the tie-up should widen USDC’s footprint in decentralised finance, it comes at the direct expense of profitability for both listed companies.
The partnership itself is not new. It was first announced on 14 May as part of a broader push by Circle and Coinbase to embed USDC more deeply across DeFi protocols, with Hyperliquid — which operates its own layer-1 blockchain and a decentralised derivatives exchange — positioned as a flagship venue. What has changed, according to JPMorgan, is the underlying economics of that partnership, now formalised in a way that shifts the balance of reserve income firmly in Hyperliquid’s favour.
Why the reserve-income split matters
Stablecoin issuers such as Circle typically earn the bulk of their revenue from interest on the reserves — largely short-term US Treasuries and cash equivalents — backing the tokens in circulation. Distribution partners like Coinbase have historically taken a cut of that income in exchange for driving usage and liquidity. By reclassifying Hyperliquid-held USDC as an on-platform balance and committing 90% of the resulting income back to Hyperliquid, Coinbase effectively converts a marketing and distribution cost into a fixed revenue-sharing obligation, one that JPMorgan believes will weigh on both Coinbase’s and Circle’s bottom lines as Hyperliquid’s share of USDC supply grows.
For European and UK institutional observers tracking dollar-stablecoin economics — an area of rising supervisory interest as MiCA’s stablecoin provisions bed in and the US Congress debates its own market-structure legislation — the episode illustrates how competitive pressure among issuers and exchanges can compress margins even as adoption metrics improve. It is a reminder that headline growth in stablecoin circulation does not automatically translate into proportionate profit for the firms underwriting it.
Neither Circle nor Coinbase has publicly disputed JPMorgan’s characterisation of the arrangement, and the bank’s estimates of Hyperliquid’s USDC holdings and the 90% revenue split have not been independently verified beyond the research note itself. The forecast revisions nonetheless underscore how closely Wall Street is now scrutinising the internal economics of stablecoin distribution deals, treating them as a distinct and consequential line item rather than a peripheral detail of DeFi expansion.
Read more: US bank lobby presses Senate to shut stablecoin yield loophole in Clarity Act
