JPMorgan Cuts Circle and Coinbase Forecasts Over Hyperliquid

JPMorgan Chase has lowered its earnings forecasts for Circle Internet Financial and Coinbase Global, citing a revised revenue-sharing agreement with the crypto trading platform Hyperliquid that analysts warn could pressure the long-term profitability of the USDC stablecoin. The bank described the new arrangement as creating a "prisoner's dilemma" for the two partners, potentially forcing them to compete for distribution at the expense of their own economics.

The core of the issue lies in a partnership announced on May 14, where Circle and Coinbase deepened USDC integration with Hyperliquid, a leading decentralized exchange and Layer 1 blockchain. Hyperliquid has since become a major channel for the stablecoin, holding an estimated $6 billion worth of USDC, representing roughly 8% of its circulating supply. The platform's trading volume exceeded $150 billion in July, underscoring its rapid growth.

Under the revised commercial terms, Coinbase will classify USDC held on Hyperliquid as "on-platform" balances. This allows Coinbase to collect the interest income, known as reserve income, generated by those funds. However, Coinbase will then pay 90% of that revenue back to Hyperliquid....