JPMorgan warns Hyperliquid deal threatens Circle's USDC economics
In brief
- JPMorgan cut Circle and Coinbase earnings estimates over Hyperliquid's revised USDC agreement
- Hyperliquid holds $6 billion USDC (8% of supply) and processed $150 billion July trading volume
- Coinbase retains 90% of reserve income from Hyperliquid under new deal, shifting economics from Circle
- USDC circulating supply fell to $73 billion from $80 billion since March amid stablecoin contraction
The Hyperliquid Effect
Hyperliquid is 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, with its share of Binance's volume reaching 11.5%. The exchange now holds approximately $6 billion of USDC, representing roughly 8% of the circulating supply.
Under the new arrangement, Coinbase will classify USDC on Hyperliquid as on-platform and collect income from reserves, paying 90% of it to Hyperliquid. This shift matters because JPMorgan estimated Coinbase previously split nearly all revenue from USDC reserves evenly with Circle.
Pressure on Stablecoin Issuers
The deal creates structural tension. Both Circle and Coinbase are now incentivized to compete for USDC distribution rather than collaborate on revenue. Kenneth Worthington, JPMorgan analyst, noted the arrangement "showcases the challenge for Circle and Coinbase partnership agreements because it can create 'a prisoner's dilemma' that drive Coinbase and Circle to compete with each other when promoting USDC distribution."
The timing compounds the pressure. USDC's circulating supply has fallen to about $73 billion from nearly $80 billion in March, part of a broader $10 billion contraction in the stablecoin market since May as crypto trading activity cooled and regulated rivals competed with USDC and USDT. JPMorgan cut earnings estimates for both companies, citing the Hyperliquid agreement and weaker crypto markets.
The question now is whether Circle and Coinbase can align their incentives before competition erodes the partnership further.
