JPMorgan has issued a warning that is rattling two major crypto names. The banking giant lowered revenue projections for Circle Internet (CRCL) and Coinbase (COIN), citing a surprising reason: their new agreements with exchange Hyperliquid undermine the economics of Circle’s USDC stablecoin and pose a greater long-term threat to Circle than to Coinbase.
At the heart of the issue, according to JPMorgan analysts led by Kenneth Worthington in a Tuesday report, is a deal structure that creates a ‘prisoner’s dilemma.’ Instead of collaborating as allies, Circle and Coinbase are driven to compete against each other for USDC distribution - sacrificing their own economic returns in the process.
Why Hyperliquid Became a Battleground
Hyperliquid is no small player. The crypto trading exchange holds around $6 billion in USDC, accounting for roughly 8% of the total circulating USDC supply according to JPMorgan estimates. Throughout July, it processed more than $150 billion in trading volume, with its volume ratio relative to Binance climbing to 11.5% - proof of its expanding market share in the derivatives space.
Under the new partnership structure, Coinbase will classify USDC on Hyperliquid as ‘on-platform,’ collect yield from reserves, and pay out 90% to Hyperliquid. Previously, JPMorgan estimated that Coinbase shared nearly all of that revenue equally with Circle. This revenue-sharing shift erodes the economic pie that the two have traditionally shared.
Double Pressure on Circle
JPMorgan trimmed earnings estimates for both companies not only because of the Hyperliquid deal, but also due to broader crypto market softness. Nevertheless, the bank noted that higher interest rates are expected to continue supporting USDC-related revenue over the long term, meaning the outlook is not entirely bleak.
For context, this pressure emerges amid what has otherwise been positive momentum for Circle. Last week, Japanese investment bank Mizuho called the final approval from U.S. regulators (OCC) for Circle to establish the First National Digital Currency Bank an important milestone - though Mizuho also cautioned that investors may be overstating its significance. The takeaway here: in the stablecoin sector, even strategic partnerships can turn into fierce competition once a third player grows large enough to shake up the balance.
Reported by CoinDesk.
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
