JPMorgan cuts estimates for Circle and Coinbase on Hyperliquid pressure

Investing.com -- JPMorgan Chase & Co. lowered its financial estimates for Circle Internet Group Inc. and Coinbase Global Inc. on Tuesday, citing pressure on their stablecoin business from a new partnership arrangement with crypto exchange Hyperliquid.

The bank said the revised agreement changes how income from Circle's USDC, the second-largest stablecoin globally, gets divided among distribution partners. JPMorgan said the arrangement creates near-term revenue challenges for both companies.

Analysts described the situation as a "prisoner's dilemma" that may push Coinbase and Circle to compete against each other when promoting USDC distribution.

On May 14, Circle and Coinbase announced a partnership with Hyperliquid to expand USDC adoption. Hyperliquid operates as both a Layer-1 blockchain and a decentralized exchange for spot and derivatives trading. The offshore platform has gained popularity for perpetual futures trading products tied to cryptocurrency tokens and real-world assets.

As of June 11, USDC became the preferred stablecoin on Hyperliquid. Under the new structure, Coinbase will classify any USDC on Hyperliquid as "on-platform," earning all associated reserve income but paying 90% of the float back to Hyperliquid. JPMorgan estimates Hyperliquid held about $6.0 billion of USDC, representing roughly 8% of total USDC supply, as of Sunday.

JPMorgan maintained its second-quarter GAAP earnings per share estimate for Circle at $0.16 but lowered its adjusted diluted EPS forecast for Coinbase to negative $0.01. The bank said the full impact of the Hyperliquid relationship will not appear in second-quarter results but will be incorporated in the second half of 2026.

The bank also reduced estimates based on weak cryptocurrency market conditions. Total crypto market capitalization fell 13% during the quarter, spot trading average daily volume declined 24% quarter-over-quarter, and decentralized finance total value locked dropped 23%.

JPMorgan said it expects longer-term USDC-related earnings to rise through 2027 on higher interest rate expectations. The bank now projects a 25 basis point rate increase at the October 2026 meeting.

Shares of Circle are down about 25% year-to-date, while Coinbase is up 2% in the same period.

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