JPMorgan downgraded Circle and Coinbase earnings forecasts after Hyperliquid deal shifts 90% of USDC reserve yields away from Circle, creating distribution headwinds for the stablecoin.
DeFi & Yields ·
JPMorgan has cut earnings forecasts for Circle and Coinbase following a deal between Coinbase and Hyperliquid that redirects the majority of USDC reserve yields away from Circle. Under the new arrangement, Coinbase will remit 90% of USDC reserve yields earned on the Hyperliquid platform to that venue rather than splitting them evenly with Circle. Hyperliquid currently holds approximately $6 billion USDC, representing 8% of total circulating supply.
JPMorgan characterizes the shift as creating a "prisoner's dilemma" for USDC distribution, as the reallocation of yields reduces Circle's revenue from the stablecoin's reserve assets. Wall Street analysts have grown cautious about Circle's economic outlook given these structural headwinds, with multiple research firms downgrading their views on the company and its partner Coinbase.
The deal highlights tension in how USDC reserve yields are distributed across platforms that hold the stablecoin. Circle's ability to capture yield revenue from third-party custodians and exchanges remains the key variable for both analyst forecasts and the long-term economics of USDC adoption.