JPMorgan downgrades Circle and Coinbase ratings: "Prisoner's dilemma" with Hyperliquid threatens USDC economy
The stablecoin market is entering a new phase of tension. JPMorgan analysts have revised their forecasts for Circle and Coinbase revenues, seeing a serious threat in the recent alliance between these giants and the decentralized exchange Hyperliquid. This involves a revision of partnership terms, which, in my opinion, could fundamentally change the balance of power in the USDC market.
What changed in May?
In May, Coinbase and Circle updated their cooperation terms with Hyperliquid. The key point: Coinbase now considers USDC placed on the perp-DEX Hyperliquid as assets "on the platform." This gives the exchange the right to earn income from the reserves of these funds, but 90% of this profit is transferred to Hyperliquid. Previously, as experts note, Coinbase and Circle shared reserve income almost equally. This arrangement, in my view, looks like a one-sided concession in favor of Hyperliquid.
Numbers that speak for themselves
Hyperliquid holds about $6 billion in USDC — roughly 8% of the total token supply in circulation. Trading volume on this platform exceeded $150 billion in July, and its share relative to Binance grew to 11.5%. This makes Hyperliquid one of the key players capable of dictating terms. JPMorgan analysts described the current situation as a "prisoner's dilemma": Circle and Coinbase are forced to compete for USDC distribution, undermining their own economics.
Market pressure and prospects
The situation is exacerbated by the overall weakening of the crypto market. Since March, the volume of USDC in circulation has decreased from $80 billion to $73 billion, and the capitalization of the entire stablecoin sector has dropped by $10 billion since May. This is an additional factor putting pressure on issuers' revenues. However, JPMorgan notes that in the long term, higher interest rates could partially support income from USDC reserves. But this is only partial compensation.
Japanese vector: expansion to the East
Amid these issues, Circle is actively seeking new markets. On July 14, the company signed a memorandum of understanding with Japan's largest payment system, JCB. The partners plan to explore the possibility of using USDC for cross-border payments, domestic settlements, and payments for goods from Japanese merchants. The first phase will be a pilot for internal fund transfers at JCB. Additionally, Circle, together with Nomura, plans to launch a USDC-based currency settlement service for local companies by 2027. JCB, serving about 140 million cardholders, opens a huge market for Circle.
My expert opinion: The revision of JPMorgan's forecasts is a serious signal. Hyperliquid, leveraging its market power, is effectively intercepting part of the income from USDC issuance, calling into question the traditional monetization model for stablecoins. Circle and Coinbase are caught in a trap: they cannot afford to abandon cooperation with such a large liquidity pool, but continuing on current terms means losing margin. Expansion into Japan is a logical step for diversification, but it will require time and investment. For now, the market will closely watch whether Circle can maintain control over the economics of its own stablecoin.