In a notable shift in the financial landscape for cryptocurrency firms, JPMorgan has reduced its earnings forecasts for both Circle Internet Group and Coinbase Global. This adjustment comes in light of the evolving dynamics surrounding Hyperliquid’s growing role in the USDC ecosystem, which is creating significant pressure on revenue sharing agreements.
The financial giant’s latest report indicates a recalibration of expectations after a thorough review of the partnership between Circle, Coinbase, and Hyperliquid. JPMorgan highlighted that this collaboration introduces immediate revenue challenges for both companies by altering how income from USDC reserves is distributed among their partners.
On May 14, Circle and Coinbase unveiled their partnership with Hyperliquid, aimed at enhancing the utility of USDC on the trading platform. Hyperliquid, functioning as a Layer-1 blockchain and decentralized exchange, has quickly attracted substantial trading activity across its spot and derivatives markets.
Describing the situation as a “prisoner’s dilemma,” JPMorgan analysts pointed out the competitive tensions this deal engenders between Circle and Coinbase. While both firms are tied to the same stablecoin network, they may find themselves competing fiercely to promote the distribution of USDC, potentially undermining their collaborative efforts.
Currently, Hyperliquid holds approximately $6 billion in USDC, representing nearly 8% of the stablecoin’s circulating supply. This significant holding positions Hyperliquid as a crucial conduit for USDC, particularly as traders increasingly rely on stablecoins for derivatives, perpetual futures, and on-chain settlements.
Under the revised agreement, Coinbase will categorize USDC held on Hyperliquid as “on-platform,” enabling it to collect reserve income from these balances. However, Coinbase is obligated to return 90% of this income back to Hyperliquid, thereby reshaping the revenue dynamics of this pivotal USDC distribution channel and placing increased pressure on Circle’s share of reserve income.
JPMorgan’s analysis reveals that previously, Coinbase had been sharing nearly all related revenue evenly with Circle. The new arrangement complicates this relationship, raising questions about how both companies will navigate their respective interests in this shifting economic landscape.
For Circle, JPMorgan maintained its second-quarter GAAP earnings per share estimate at $0.16, but for Coinbase, it lowered the adjusted diluted earnings per share forecast to -$0.01. This revision is attributed to the Hyperliquid partnership and the prevailing weaker trading conditions in the cryptocurrency market.
It’s important to note that JPMorgan anticipates the full impact of the Hyperliquid deal will not be reflected in second-quarter results. The bank expects that the ramifications of the new revenue-sharing model will become clearer in the latter half of 2026 as the changes take root.
Furthermore, the broader cryptocurrency market conditions have also contributed to these forecast adjustments. During the quarter, the total cryptocurrency market capitalization experienced a 13% decline, while the average daily volume of spot trading fell by 24% compared to the previous quarter. Additionally, the total value locked in decentralized finance saw a drop of 23%, which compounds the pressures faced by firms reliant on trading activity and stablecoin flows.
USDC itself has also been losing some traction in the market, with its supply decreasing to about $73 billion from nearly $80 billion in March. This contraction reflects a wider trend within the stablecoin market as trading activity slows and competitors vie for market share.
Despite the immediate challenges, JPMorgan remains optimistic about the potential for USDC-related earnings to improve through 2027, provided interest rates remain elevated. The bank is projecting a 25 basis point rate increase during the October 2026 meeting, which could bolster reserve income on stablecoin balances.
