JPMorgan Lowers Forecasts for Circle and Coinbase Due to Hyperliquid

Circle and Coinbase's new agreement with Hyperliquid is expected to negatively impact the USDC stablecoin and pose risks for the companies, according to analysts at JPMorgan, as reported by CoinDesk.

What Happened

In May, Coinbase and Circle updated their partnership terms with Hyperliquid. The American exchange now treats USDC on the perp-DEX as an asset "on the platform" and earns revenue from the reserves of these funds, passing 90% of this amount to Hyperliquid.

According to JPMorgan specialists, previously, Coinbase shared revenue with Circle almost equally.

Hyperliquid holds $6 billion in USDC, accounting for about 8% of the circulating supply of the token. The exchange is among the largest trading platforms in the crypto industry and leads in decentralized perpetual futures trading. In July, trading volume on the platform exceeded $150 billion, and its market share relative to Binance rose to 11.5%.

Analysts' Opinions

JPMorgan described the new arrangement as a "prisoner's dilemma" for Circle and Coinbase, prompting the bank to lower its profit forecasts for both companies.

"The change in relationships with Hyperliquid highlights the issues with Circle and Coinbase's partnership agreements. It could create a 'prisoner's dilemma' and force the companies to compete for the distribution of USDC," the experts noted.

Analysts also pointed to the weakening crypto market as an additional pressure factor. Since March, Circle's stablecoin supply has decreased from $80 billion to $73 billion. The total market capitalization of the stablecoin sector has dropped by $10 billion since May.

Market capitalization of the stablecoin sector. Source: DefiLlama.

However, JPMorgan emphasized that higher interest rates could partially support revenues from USDC reserves in the long term.

USDC Expansion in Japan

On July 14, Japan's largest payment system, JCB, and Circle signed a memorandum of understanding to develop stablecoin-based solutions.

The companies will explore the use of USDC for cross-border payments, domestic settlements, and purchases from Japanese merchants, including by tourists. The first phase will involve a pilot program for domestic fund transfers within JCB.

According to the partners, stablecoins could reduce costs for international transactions, increase the speed of settlements, and simplify payments for foreign visitors, who currently have to use bank cards with set limits.

JCB serves around 140 million cardholders and over 40 million merchant locations worldwide.

At the end of June, Circle announced plans to launch a currency settlement service based on USDC for local companies in collaboration with Japanese financial corporation Nomura, with the project set to launch in 2027.

It is worth noting that in May, Christoph Hoch, head of tokenization and digital assets at Union Investment, warned of liquidity crisis risks for Tether and Circle.