- JPMorgan analysts led by Kenneth Worthington cut the bank’s Coinbase price target to US$196 (AU$282.24) from US$283 (AU$407.52) on July 14, keeping an Overweight rating, and lowered earnings estimates for both Coinbase and Circle.
- Under the revised agreement, Coinbase classifies USDC held on Hyperliquid as on-platform, collects the reserve income and pays 90% of it to Hyperliquid; the two companies previously split that revenue almost evenly.
- JPMorgan estimates Hyperliquid holds about US$6 billion (AU$8.64 billion) of USDC, roughly 8% of a circulating supply that has slipped to about US$73 billion (AU$105.12 billion) from US$80 billion (AU$115.2 billion) in March.
JPMorgan cut its Coinbase price target to US$196 (AU$282.24) from US$283 (AU$407.52) and lowered earnings estimates for both Coinbase and Circle on July 14, warning that the companies’ revised USDC agreement with Hyperliquid weakens the stablecoin’s economics for both firms.
The note, from a team led by analyst Kenneth Worthington, kept an Overweight rating on Coinbase.
Under the reworked arrangement, Coinbase classifies USDC held on Hyperliquid as on-platform, collects the income earned on the reserves backing those tokens, and passes 90% of it to Hyperliquid. Coinbase and Circle previously split nearly all of that revenue evenly.
The change can create a “prisoner’s dilemma”, the analysts wrote, pushing Coinbase and Circle to compete with each other in promoting USDC distribution.
When one side offers aggressive terms to win a large distribution partner, the note argued, it erodes the other’s economics, and defending revenue share risks losing the distribution instead. The team characterised the agreement as a drag on net revenue for both companies.
Coinbase and Circle co-founded the Centre Consortium in 2018 to issue USDC. When that venture wound down in 2023, Coinbase took an equity stake in Circle and Circle assumed sole governance of the token, with Coinbase continuing to share in the interest income its reserves generate.
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Hyperliquid’s Scale Sets the Precedent
JPMorgan estimates Hyperliquid holds about US$6 billion (AU$8.64 billion) of USDC, roughly 8% of circulating supply, and the note put the exchange’s trading volume this month above US$150 billion (AU$216 billion), about 11.5% of Binance’s.
USDC’s circulating supply has contracted to about US$73 billion (AU$105.12 billion) from nearly US$80 billion (AU$115.2 billion) in March, according to the note, against a backdrop of weaker crypto trading activity and stiffening stablecoin competition.
The analysts also pointed to OpenUSD, a stablecoin unveiled by a consortium that includes Visa, BlackRock, Alphabet and Coinbase itself, which shares most of its reserve income with distribution partners. JPMorgan cited the project as further pressure on the margins incumbent issuers earn from stablecoin reserves.
Circle shares closed at US$63.22 (AU$91.04) on July 14 and Coinbase at US$161.50 (AU$232.56), both higher on a day US markets rallied after softer June inflation data.
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