JPMorgan warns Hyperliquid deal could squeeze Circle and Coinbase

JPMorgan has lowered its earnings forecasts for Circle and Coinbase after a new USDC revenue-sharing agreement with Hyperliquid changed how income from the stablecoin’s reserves will be divided.

According to a JPMorgan research note, the revised agreement could reduce the long-term profitability of the USDC business for both companies, even as they continue pursuing higher adoption of the dollar-backed stablecoin.

The bank argued that competition among distribution partners may force issuers to give away a larger share of reserve income to secure market share.

New revenue-sharing terms reduce reserve income

Under the arrangement highlighted by JPMorgan, 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 instead of splitting the proceeds with Circle under the companies’ existing economic arrangement.

JPMorgan estimated that Hyperliquid currently holds about $6 billion worth of USDC, representing roughly 8% of the stablecoin’s circulating supply. Because of the platform’s growing role in the USDC ecosystem, the bank believes the revised economics could have a noticeable effect on future earnings for both Circle and Coinbase.

Describing the competitive dynamic, JPMorgan said both companies face pressure to increase USDC usage even if doing so requires surrendering a larger portion 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.

The revenue-sharing concerns follow an announcement made on May 14, when Circle and Coinbase revealed a partnership with Hyperliquid to deepen USDC integration across the 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 commercial terms supporting that expansion, rather than the growth in usage itself, have become the main issue for investors evaluating future earnings.

Wall Street remains divided on Circle’s outlook

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 generate attractive economics.

By contrast, Bernstein and William Blair have maintained positive ratings on Circle, indicating they still expect the stablecoin issuer to benefit from continued growth in digital dollar usage despite increasing competition for distribution partnerships.

Even after cutting its earnings estimates, JPMorgan said it continues to forecast growth in USDC-related earnings 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 the income earned on the cash and Treasury reserves backing USDC, providing an offset to the revenue-sharing concessions outlined in the Hyperliquid agreement.

For investors, the latest debate has shifted attention away from USDC’s circulating supply alone and toward how reserve income is divided among issuers, exchanges, and distribution partners. JPMorgan’s analysis suggests that while adoption can continue rising, the financial value retained by Circle and Coinbase may come under increasing pressure as more platforms negotiate similar commercial terms.