Recent developments regarding Circle and Coinbase highlight significant shifts in the stablecoin market. JPMorgan, a leading financial institution, has revised its earnings projections for both companies due to a newly established revenue-sharing deal with Hyperliquid.
This recent agreement alters the financial dynamics surrounding USDC, the dollar-backed stablecoin employed by both firms. As per JPMorgan’s analysis, these changes may negatively impact the long-term profitability of USDC operations for Circle and Coinbase.
Impact of the New Agreement
Specifically, the deal dictates that Coinbase will designate USDC held on Hyperliquid as "on-platform" assets. Consequently, while Coinbase retains the revenue generated from these deposits, it is obligated to return 90% of that income to Hyperliquid. This arrangement significantly diverges from traditional profit-sharing models that previously existed with Circle.
JPMorgan notes that Hyperliquid currently manages approximately $6 billion in USDC, accounting for about 8% of the stablecoin’s available supply. With such a substantial amount at stake, the pressure mounts on both Circle and Coinbase to enhance USDC adoption, even if it means sacrificing a larger slice of reserve revenue to distribution partners.
The financial institution draws attention to a competitive landscape where maintaining or growing market share could drive issuers to relinquish a greater portion of their income. This situation may lead to both firms prioritizing expansion over profitability, a move that could prove challenging for stakeholders and investors.
Further compounding these concerns, the commercial terms of the partnership rather than just the increase in USDC use have garnered heightened scrutiny among market analysts. Such insights resonate with recent trends observed in the crypto industry, especially concerning stablecoin usage, as seen in articles on meme tokens and fan assets.
As the implications of this new revenue-sharing model continue to unfold, industry observers will be keenly watching both companies’ strategies in adapting to the evolving crypto ecosystem.
This material is for informational purposes only and is not financial advice.
