JPMorgan Adjusts Forecasts for Circle and Coinbase Amid Hyperliquid Deal

JPMorgan Adjusts Earnings Outlook for Circle and Coinbase

JPMorgan has revised downward its earnings forecasts for Circle and Coinbase in light of a new revenue-sharing agreement involving Hyperliquid and the stablecoin USDC. According to a recent report, the changes in how USDC revenue will be shared could significantly affect the profit margins of both companies.

Impact of the Hyperliquid Agreement

The investment bank highlights that the revised agreement with Hyperliquid could weaken the economic viability of USDC for both firms. As part of this new arrangement, Coinbase will now allocate 90% of the reserve yields generated by USDC on Hyperliquid back to the platform, rather than splitting the revenues with Circle, as per their previous agreement. JPMorgan estimates that the Hyperliquid platform currently manages approximately $6 billion in USDC, equating to around 8% of the total circulating supply.

Increased Competitive Pressure

JPMorgan pointed out that competition among distribution partners is intensifying, pushing issuers like Coinbase and Circle to concede a larger share of reserve income to maintain market presence. The bank cautioned that this pressure could lead to reduced long-term profitability for both companies, as they strive to boost USDC adoption even if it impacts their revenue retention.

Divergent Views on Long-term Outlook

Analysts on Wall Street are currently divided regarding the long-term outlook for Circle. Some firms, like Mizuho, have adopted a more cautious perspective, downgrading Circle’s stock amidst concerns over the economic incentives of growing USDC adoption. Conversely, others, including Bernstein and William Blair, have retained their positive outlook, expecting continuous growth in digital dollar usage despite increasing competition.

Future Projections Amid Changing Landscape

Despite the adjustments to its earnings estimates, JPMorgan forecasts still predict growth in USDC-related revenues through 2027, primarily driven by an anticipated increase in interest rates. The bank expects a 25-basis-point hike in the Federal Reserve’s rate by October 2026, which could enhance income earned on the cash and Treasury reserves backing USDC.

Overall, the latest developments have shifted investor focus from the mere circulation of USDC to the distribution of income generated from its reserves. JPMorgan’s analysis indicates that while adoption of USDC could continue to rise, the financial returns for Circle and Coinbase may face mounting challenges as competitive agreements evolve.