Hyperreality Hyperliquid: Why JPMorgan Downgraded Circle and Coinbase Ratings
The stablecoin market is entering a phase of structural restructuring, and not all players will emerge as winners. JPMorgan analysts have revised their revenue forecasts for Circle and Coinbase, pointing to the new partnership with Hyperliquid as a key risk factor. This is not just a change of counterparty—it is a signal of a fundamental shift in the economics of USDC distribution.
The crux of the issue lies in the updated partnership terms that took effect in May. Previously, income from USDC reserves held on Hyperliquid was split almost equally between Coinbase and Circle. Now, the scheme has changed dramatically: Coinbase treats USDC on the perp-DEX as an asset held on its own platform, receives all the reserve income, and then passes 90% of that amount back to Hyperliquid. This effectively turns Coinbase into a financial intermediary, stripping Circle of a significant share of its margin.
The Prisoner's Dilemma in Action
JPMorgan specialists described this situation as a "prisoner's dilemma" for the two issuers. Hyperliquid, holding about $6 billion in USDC (roughly 8% of the token's total circulating supply), has gained leverage. The exchange has become a dominant force in the derivatives market: in July, trading volume on the platform exceeded $150 billion, and its share relative to Binance grew to 11.5%. This makes Hyperliquid an indispensable distribution channel, but under extremely unfavorable terms for the stablecoin issuer.
The bank emphasizes that the new scheme forces Circle and Coinbase to compete for the right to serve Hyperliquid, inevitably leading to a decline in their own profitability. An additional pressure factor is the overall weakening of the crypto market: since March, the circulating supply of USDC has dropped from $80 billion to $73 billion, and the total market capitalization of the stablecoin sector has decreased by $10 billion since May.
The Japanese Vector: An Attempt at Compensation
Against this backdrop, Circle is actively seeking new markets. On July 14, the company signed a memorandum of understanding with Japan's largest payment system, JCB. The parties intend to jointly develop stablecoin-based solutions for cross-border payments, domestic settlements, and payments for goods from Japanese merchants, including tourists. The first step will be a pilot for internal fund transfers at JCB, which serves about 140 million cardholders.
However, in my assessment, even a successful entry into the Japanese market is unlikely to fully compensate for the losses from the revised terms with Hyperliquid. Circle and Coinbase's problem is not a lack of demand for USDC, but rather that the key channel for this demand—Hyperliquid—now dictates its own terms rather than accepting others'. In the long term, higher interest rates may partially support reserve income, but this is only a temporary relief, not a solution to the structural problem.