JPMorgan recently lowered its earnings forecasts for both Circle Internet Group and Coinbase Global, signaling potential challenges ahead for the USDC stablecoin ecosystem. The bank adjusted Coinbase's diluted earnings per share estimate to -$0.01 while maintaining Circle's Q2 GAAP EPS estimate at $0.16.
The adjustments come in the wake of Hyperliquid's significant role in the USDC market, with the platform holding around $6 billion in USDC, nearly 8% of the total circulating supply. This arrangement has led JPMorgan to describe the situation as a "prisoner's dilemma," suggesting that both Circle and Coinbase may find themselves in a competitive stance over USDC distribution despite their shared interests.
In May, Circle and Coinbase announced a partnership with Hyperliquid aimed at boosting USDC usage within its decentralized exchange. However, this deal alters the revenue-sharing dynamics, as Coinbase will now treat USDC held on Hyperliquid as "on-platform," allowing it to claim reserve income from those balances. Yet, Coinbase will also remit 90% of the float income back to Hyperliquid, fundamentally changing the financial landscape for USDC and its distribution partners.
JPMorgan noted that the effects of this agreement will not be fully realized in the second quarter, as anticipated complications will likely become clearer in the latter half of the year. Broader market conditions have added to the skepticism, with total crypto market capitalization dropping 13% and average daily spot trading volumes down 24% from the previous quarter. As decentralized finance activity wanes, firms reliant on trading and stablecoin transactions face increasing pressure.
This material is for informational purposes only and should not be considered financial advice.
