JPMorgan Flags Hyperliquid Deal as New Pressure Point for Circle and Coinbase

What to Know

• JPMorgan lowered forecasts for Circle Internet and Coinbase, citing the revamped Hyperliquid relationship, weaker crypto trading volumes, and softer asset prices.
• The bank described the arrangement as creating a “prisoner’s dilemma” between Circle and Coinbase over USDC distribution economics.
• Hyperliquid holds about $6 billion of USDC, equal to roughly 8% of circulating supply, according to JPMorgan’s estimate.
• Hyperliquid processed more than $150 billion in trading volume in July alone, while its volume relative to Binance climbed to 11.5%.
• Under the new setup, Coinbase will classify USDC on Hyperliquid as “on-platform,” collect reserve-generated income, and pay 90% of that income to Hyperliquid.
• JPMorgan estimated Coinbase previously split nearly all of the revenue evenly with Circle.
• USDC circulating supply has fallen to about $73 billion from nearly $80 billion in March.
• The broader stablecoin market has contracted by $10 billion since May as crypto trading cooled and regulated competitors gained traction.
• Mizuho said Circle’s final approval from the U.S. Office of the Comptroller of the Currency to establish First National Digital Currency Bank is positive, but investors may be overestimating its significance.

Hyperliquid’s Growth Puts USDC Economics Under the Microscope

JPMorgan has identified Hyperliquid’s expanding role in crypto derivatives as a new pressure point for Circle and Coinbase, arguing that the latest commercial arrangement around USDC could weigh on near-term revenue and raise a larger strategic question for Circle’s stablecoin economics. The concern centers on the way distribution, reserve income, and platform incentives are being reshaped as fast-growing trading venues become more important to stablecoin circulation.

Hyperliquid has emerged as one of the most closely watched crypto trading venues, with particular strength in decentralized perpetual futures. Its growth matters to stablecoin issuers because active trading platforms can become major repositories of dollar-pegged tokens. In this case, Hyperliquid holds about $6 billion of USDC, which JPMorgan estimated at roughly 8% of the token’s circulating supply. That makes the venue a meaningful channel for USDC distribution and a key commercial battleground for the companies tied to the token’s economics.

For Circle, USDC is the core product around which its business model is built. For Coinbase, USDC is both a strategic asset and a revenue contributor through the income associated with reserves and platform activity. When a single trading venue gathers a large share of USDC balances, the terms attached to those balances can have a measurable impact on how value is divided among the issuer, exchange partner, and trading platform.

Why JPMorgan Sees a “Prisoner’s Dilemma”

JPMorgan described the revised Hyperliquid arrangement as exposing a “prisoner’s dilemma” for Circle and Coinbase. In market terms, that phrase captures a situation in which two partners may each have an incentive to act in a way that protects their own distribution position, even if doing so weakens the economics of the broader partnership. The issue is not simply whether USDC grows on Hyperliquid, but how the revenue tied to that growth is allocated.

Under the new arrangement, Coinbase will classify USDC on Hyperliquid as “on-platform.” That classification allows Coinbase to collect income generated by reserves connected to those balances, while paying 90% of that income to Hyperliquid. JPMorgan estimated that Coinbase previously split nearly all of the revenue evenly with Circle. The revised structure therefore changes the economic path through which reserve-linked income is shared and creates a stronger incentive for platforms to demand a larger portion of stablecoin-related value.

For market participants, the broader implication is that USDC distribution may become more expensive as venues with growing liquidity negotiate better terms. If major trading platforms can attract large stablecoin balances, they may be able to capture more of the economics that once flowed more predictably to Circle and Coinbase. That dynamic is especially important in a market where stablecoins function as settlement assets, collateral, trading capital, and liquidity bridges across centralized and decentralized venues.

Hyperliquid’s Scale Increases Its Bargaining Power

Hyperliquid’s rapid rise gives the arrangement added significance. The platform processed more than $150 billion in trading volume in July alone, and its volume relative to Binance climbed to 11.5%. Those figures underscore the venue’s growing relevance in derivatives activity, a segment where stablecoin liquidity can be essential for margin, settlement, and rapid capital rotation.

As a leading decentralized perpetual futures exchange, Hyperliquid sits at the intersection of several important crypto trends: on-chain trading infrastructure, derivatives demand, stablecoin-based collateral, and competition with established centralized exchanges. The larger its share of trading volume becomes, the more valuable its stablecoin balances become to issuers and distribution partners. That can shift leverage toward the venue and away from the companies that supply or support the token.

Technical traders and crypto market watchers often focus on volume share because it can reveal changing liquidity patterns before they show up in broader market structure. In Hyperliquid’s case, rising volumes and a large USDC balance suggest that the venue is not merely an experimental platform but a meaningful liquidity hub. For Circle and Coinbase, that makes the commercial terms attached to Hyperliquid more consequential than a standard platform integration.

Circle and Coinbase Face Earnings Estimate Cuts

JPMorgan lowered earnings estimates for both Circle Internet and Coinbase, citing the Hyperliquid changes alongside weaker crypto trading volumes and asset prices. The combination matters because stablecoin revenue and trading activity are often tied to broader crypto market momentum. When trading activity cools, demand for stablecoins used in active market participation can soften, and exchanges can also see lower transaction-related revenue.

The bank indicated that higher interest rates could provide some support for USDC-related revenue over the longer term. Stablecoin issuers and related partners can benefit when reserves backing dollar-pegged tokens generate higher income. However, the Hyperliquid arrangement highlights that the level of interest income is only one part of the equation. The distribution of that income among issuers, exchanges, and platforms is increasingly central to how investors evaluate the business model.

For Coinbase, classifying USDC on Hyperliquid as “on-platform” may preserve a role in the economics of a major liquidity venue, but the requirement to pay 90% of reserve-generated income to Hyperliquid changes the revenue retention profile. For Circle, the concern is more structural: if key distribution partners and trading venues increasingly negotiate terms that reduce Circle’s share of reserve economics, the company’s long-term stablecoin margin profile could face pressure.

USDC Supply Momentum Has Cooled

USDC has also lost momentum in recent months. Its circulating supply has fallen to about $73 billion from nearly $80 billion in March. That decline comes as the stablecoin market has contracted by $10 billion since May, reflecting cooler crypto trading activity and the emergence of new regulated competitors challenging the dominance of USDC and Tether’s USDT.

Stablecoin supply is a closely watched indicator because it can reflect demand for crypto liquidity, market participation, and dollar-denominated capital sitting on-chain or on trading platforms. A rising supply can suggest expanding demand for settlement and trading liquidity, while a declining supply can point to lower activity or shifting market preferences. In USDC’s case, the recent drop places additional attention on the quality and profitability of remaining distribution channels.

Competition is also intensifying. Regulated rivals are chipping away at the market positions of established stablecoins, and trading venues have more options when deciding which dollar-pegged assets to support. That makes platform relationships more valuable but potentially more costly. If venues can choose among multiple regulated stablecoins, they may push for more favorable economics from issuers and exchange partners seeking distribution.

Regulatory Milestone Adds a Separate Narrative

Circle has also drawn attention from investors after receiving final approval from the U.S. Office of the Comptroller of the Currency to establish First National Digital Currency Bank. Japanese investment bank Mizuho described that approval as a positive milestone, while cautioning that investors may be overestimating its significance.

The regulatory development gives Circle a potentially stronger institutional narrative, particularly as stablecoins become more integrated with traditional financial oversight. However, regulatory progress does not automatically resolve the commercial challenge raised by JPMorgan. Even with stronger regulatory positioning, Circle still depends on the economics of USDC circulation, reserve income, and platform distribution.

That distinction is important for investors assessing the stablecoin sector. A company can make progress on regulatory legitimacy while still facing pressure from competitive revenue-sharing terms. In the case of USDC, the key question is whether growth across major venues can translate into attractive economics for Circle and Coinbase, or whether more of the upside is increasingly captured by platforms that control user activity and liquidity.

What This Means for the Stablecoin Market

The Hyperliquid arrangement highlights a maturing stablecoin market where distribution is no longer just about getting a token listed or supported. It is about negotiating who earns what from the reserves behind the token, who controls the customer relationship, and who has the leverage to demand a larger share of the economics.

For crypto markets, this could become a recurring theme. As decentralized venues scale and compete with centralized exchanges, stablecoin issuers may need to offer more attractive terms to secure liquidity. That could pressure margins even if total stablecoin adoption remains strong. For exchange partners such as Coinbase, the challenge is balancing strategic USDC growth with revenue retention in a market where major venues can command substantial concessions.

FXCOINZ views the JPMorgan assessment as a sign that investors are becoming more focused on the microeconomics of stablecoins rather than simply tracking headline supply. The next phase of competition may be determined by platform-level relationships, reserve income sharing, and whether issuers can maintain profitability while expanding distribution across high-growth trading venues.

Frequently Asked Questions (FAQs)

Why is Hyperliquid important to USDC?

Hyperliquid is important because it holds about $6 billion of USDC, which JPMorgan estimated at roughly 8% of circulating supply. That makes it a major distribution venue for the stablecoin and gives its commercial terms greater relevance for Circle and Coinbase.

What did JPMorgan say about Circle and Coinbase?

JPMorgan lowered earnings forecasts for Circle Internet and Coinbase, citing the revised Hyperliquid arrangement, weaker crypto trading volumes, and softer asset prices. The bank also said the arrangement creates a “prisoner’s dilemma” around USDC distribution economics.

What does the “prisoner’s dilemma” mean in this context?

In this context, it means Circle and Coinbase may each have incentives to compete for USDC distribution in ways that protect their own position but reduce the overall economics of their partnership. JPMorgan argued that the Hyperliquid relationship illustrates this tension.

How does the new Coinbase and Hyperliquid arrangement work?

Under the new setup, Coinbase will classify USDC on Hyperliquid as “on-platform,” collect income generated by reserves, and pay 90% of that income to Hyperliquid. JPMorgan estimated that Coinbase previously split nearly all of the revenue evenly with Circle.

How large is Hyperliquid’s trading activity?

Hyperliquid processed more than $150 billion in trading volume in July alone. Its volume relative to Binance climbed to 11.5%, highlighting its growing share in the crypto derivatives market.

What has happened to USDC supply recently?

USDC circulating supply has declined to about $73 billion from nearly $80 billion in March. The decline has occurred alongside a broader $10 billion contraction in the stablecoin market since May.

Could higher interest rates help USDC revenue?

JPMorgan expects higher interest rates to provide some support for USDC-related revenue over the longer term. However, the benefit depends partly on how reserve-generated income is shared among Circle, Coinbase, and major distribution platforms.

What did Mizuho say about Circle’s banking approval?

Mizuho said Circle’s final approval from the U.S. Office of the Comptroller of the Currency to establish First National Digital Currency Bank is a positive milestone. It also cautioned that investors may be overestimating the significance of that approval.

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