CoinDesk
JPMorgan cut earnings estimates for Circle and Coinbase on Tuesday, arguing that a revamped agreement with Hyperliquid creates a "prisoner's dilemma" that drags on Circle's USDC economics. Under the new arrangement, Coinbase classifies USDC on Hyperliquid as on-platform, collects the income generated by reserves, and pays 90% of it to Hyperliquid. JPMorgan estimated the previous split was nearly even between Coinbase and Circle.
Why it matters
Hyperliquid has become one of crypto's fastest-growing trading venues and the leading decentralized perpetual futures exchange. The platform processed more than $150 billion in trading volume in July alone, while its share of Binance's volume climbed to 11.5%. USDC balances on Hyperliquid have swelled to roughly $6 billion, or about 8% of circulating supply, making the DEX an increasingly important distribution channel for the stablecoin. JPMorgan analysts led by Kenneth Worthington argued the structure now pushes Circle and Coinbase to compete for USDC distribution at the expense of each other's economics.
Market impact
The earnings cuts layered in weaker crypto trading volumes and asset prices, though JPMorgan expects higher interest rates to provide some support for USDC-related revenue over the longer term. The stablecoin market itself is contracting: USDC's circulating supply has fallen to roughly $73 billion from nearly $80 billion in March, part of a broader $10 billion drop since May as trading cooled and regulated rivals chipped at USDC and Tether's dominance. Separately, Mizuho told investors this week that Circle's final OCC approval to establish First National Digital Currency Bank is a positive milestone, but the market may be overestimating its near-term significance.
Frequently asked questions
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What did JPMorgan say about Circle, Coinbase, and Hyperliquid?
JPMorgan cut earnings estimates for both Circle and Coinbase, arguing that a revamped agreement with Hyperliquid creates a "prisoner's dilemma" that pressures Circle's USDC economics by pushing the two partners to compete for distribution.
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How much USDC does Hyperliquid hold?
JPMorgan estimated Hyperliquid holds about $6 billion of USDC, or roughly 8% of the stablecoin's circulating supply, making the DEX one of the largest distribution channels for the token.
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How did the Hyperliquid revenue split change?
Under the new arrangement, Coinbase classifies USDC on Hyperliquid as on-platform, collects reserve income, and pays 90% of it to Hyperliquid. JPMorgan estimated Coinbase previously split nearly all of that revenue evenly with Circle.
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Why is Hyperliquid so important to crypto trading?
Hyperliquid processed more than $150 billion in trading volume in July alone, and its share of Binance's volume climbed to 11.5%, making it the leading decentralized perpetual futures exchange and one of crypto's fastest-growing venues overall.
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What is happening to USDC's market share?
USDC's circulating supply has fallen to roughly $73 billion from nearly $80 billion in March, part of a broader $10 billion contraction in the stablecoin market since May as crypto trading cooled and regulated rivals chipped at USDC and Tether's dominance.
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