JPMorgan Warns Circle, Coinbase Face Structural Pressure on Stablecoin Revenue

JPMorgan lowered its outlook for stablecoin revenue at Circle and Coinbase, warning that both companies face structural pressure on earnings.

Bloomberg reported on July 14 that a JPMorgan report described the companies’ new partnership with Hyperliquid as creating a “prisoner’s dilemma” that deepens conflicts of interest between Circle and Coinbase.

“The changing relationship with Hyperliquid highlights the structural problems embedded in the Circle-Coinbase partnership agreement,” JPMorgan analyst Kenneth Worthington wrote in the report. As the two companies push to expand USDC circulation, the arrangement could leave them competing against each other. In the near term, the agreement will be a headwind to net revenue for both Circle and Coinbase, he added.

At the center of the issue is the way USDC reserve income is shared. Under an agreement announced in May, Coinbase manages USDC circulation on Hyperliquid but must share most of the reserve yield with the Hyperliquid protocol. JPMorgan said that structure eats into a substantial portion of the incremental revenue Coinbase otherwise could have captured.

JPMorgan cut its price target on Coinbase to $196 from $283 in the report. On the day the report was released, Coinbase shares traded about 2.3% higher at $160.94, while Circle was little changed at $62.84.

Broader industry competition was also flagged as a risk. A consortium including Visa, BlackRock, Alphabet and Coinbase unveiled OpenUSD, a stablecoin that shares most reserve income with distribution partners, increasing margin pressure on incumbent players. Mizuho Securities also downgraded Circle to underperform from neutral, saying new competitors offering more favorable revenue-sharing terms to banks, exchanges and payments companies could compress margins across the industry.