JPMorgan says Hyperliquid's rise threatens Circle's USDC economics
JPMorgan has lowered its financial forecasts for Circle and Coinbase following a new agreement involving the crypto exchange Hyperliquid. The bank suggests this deal creates a 'prisoner's dilemma' that weakens the economic model of the USDC stablecoin.
Why it matters
This analysis highlights the evolving competitive landscape of stablecoin distribution and the potential financial risks for major crypto infrastructure providers.
JPMorgan (JPM) lowered its forecasts for Circle Internet (CRCL) and Coinbase (COIN), saying their revamped agreement with Hyperliquid weakens the economics of Circle's USDC and posed a bigger long-term threat to the stablecoin issuer.
The bank said the deal created a "prisoner's dilemma," incentivizing stablecoin issuer Circle and crypto exchange Coinbase to compete for distribution of the dollar-pegged token at the expense of each other's economics.
Hyperliquid, now one of the largest crypto trading venues, holds about $6 billion of USDC, or roughly 8% of the circulating supply, JPMorgan estimated.
"We think the change in the Hyperliquid relationship showcases the challenge for Circle and Coinbase partnership agreements because it can create 'a prisoner’s dilemma' that drive Coinbase and Circle to compete with each other when promoting USDC distribution," analysts led by Kenneth Worthington said in the Tuesday report.
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