JPMorgan warns that Hyperliquid deal could pressure Circle and Coinbase

JPMorgan lowered its earnings forecasts for Circle and Coinbase after USDC’s new profit-sharing agreement with Hyperliquid changed the way revenue from stablecoin reserves will be split.

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

The bank said that competition among distribution partners could force issuers to release a larger portion of reserve income to gain market share.

The new profit sharing rules reduce the fixed income

Under the arrangement highlighted by JPMorgan, Coinbase will classify USDC held in Hyperliquid as “platform” currencies. As a result, Coinbase will receive the income saved by those deposits but will return 90% of that money to Hyperliquid instead of dividing the profit with Circle under the existing economic arrangement of the companies.

JPMorgan estimates that Hyperliquid currently holds about 6 billion USDC, which represents about 8% of the stablecoin’s circulating supply. Due to the growing role of the platform in the USDC ecosystem, the bank believes that the revised economy can have a significant impact on the future earnings of both Circle and Coinbase.

Explaining the competitive dynamics, JPMorgan said that both companies are facing pressure to increase the use of USDC even if doing so requires handing over a large portion of the revenue to distribution partners. The bank noted this situation as another attempt to increase the adoption of children who can be adopted at the cost of low interest.

The revenue sharing concern follows the announcement made on May 14, when Circle and Coinbase announced a partnership with Hyperliquid to deepen the integration of USDC across the entire crypto trading platform. Hyperliquid operates both a Layer-1 blockchain and decentralized exchange and permanent futures markets.

Since June 11, USDC has become the preferred stablecoin of Hyperliquid, which strengthens the importance of the platform within the distribution network of Circle. JPMorgan said the trade policies underpinning that expansion, rather than consumption growth itself, have become a bigger issue for investors assessing future benefits.

Wall Street remains divided on the consensus view

Elsewhere on Wall Street, analysts reached mixed conclusions about Circle’s long-term prospects. Mizuho also took a more cautious stance on the company, downgrading the stock as concerns grew about whether increasing USDC acceptance would continue to produce attractive economies of scale.

Conversely, Bernstein and William Blair have maintained positive ratings on Circle, indicating that they still expect the stablecoin issuer to benefit from continued growth in the use of the digital dollar despite increasing competition from distribution partners.

Even after cutting its earnings estimates, JPMorgan said it continues to forecast USDC-related earnings growth through 2027. The bank said that expectation in its interest rate outlook, which now includes a Federal Reserve rate hike of 25 basis points at the October 2026 meeting.

Higher rates generally increase the income earned by the currency and Treasury reserves backing the USDC, which provides a discount to the profit-sharing agreements specified in the Hyperliquid agreement.

For investors, the recent debate has shifted attention away from the circulating supply of USDC alone and how the reserve income is split between issuers, traders, and distribution partners. JPMorgan’s analysis suggests that while acquisitions may continue to rise, the amount of money held by Circle and Coinbase may come under increasing pressure as more platforms negotiate similar trading terms.