Mizuho downgraded Circle (CRCL) to Underperform from Neutral and cut its price target to $50 from $85, while JPMorgan lowered earnings estimates for both Circle and Coinbase on the same day. Both firms cited mounting pressure on the economics underpinning USDC, Circle's dollar-backed stablecoin, as competition intensifies in the stablecoin market. The primary concern centers on Open USD, a new stablecoin backed by a consortium of more than 140 financial, technology, and crypto companies including Visa, Mastercard, Stripe, BlackRock, and Coinbase, which employs a pass-through revenue model that routes nearly all reserve yield to distributors.
Mizuho Cites Open USD Competitive Threat
Mizuho analyst Dan Dolev identified Open USD as the biggest threat to Circle's business model. Unlike Circle's model, where the company retains roughly 38% of reserve income after sharing revenue with partners such as Coinbase and Binance, Open USD operates a pass-through model that routes nearly all reserve yield to distributors while keeping a small management fee. Dolev wrote that distribution partners will be emboldened to demand more from Circle over time. Mizuho noted that Circle's current revenue-sharing agreement with Coinbase, its largest USDC distribution partner, is expected to be up for renewal next month, and Coinbase's status as a founding Open USD member could provide extra leverage in negotiating new terms.
JPMorgan Points to Hyperliquid Revenue-Sharing Agreement
JPMorgan highlighted Circle's revised USDC partnership with Hyperliquid decentralized exchange as evidence that distributors are already securing more favorable economics. Under the new agreement, Coinbase will receive all reserve income tied to Hyperliquid's USDC balances before giving back roughly 90% of the yield to the DEX. The bank referred to the arrangement as a prisoner's dilemma that incentivizes Circle and Coinbase to compete against each other to offer the most attractive revenue-sharing terms to retain partners. Hyperliquid currently holds about $6 billion in USDC, equal to roughly 8% of the circulating supply, according to JPMorgan.
Bernstein and William Blair Maintain Outperform Ratings
Bernstein reiterated its Outperform rating and $190 price target on Circle following the Open USD consortium's launch earlier this month, arguing that Open USD validates stablecoins as a growing asset class rather than posing a competitive threat. The firm stated that Circle's liquidity, regulatory head start, and network effects will be difficult to replicate, adding that other consortium-led financial projects have historically struggled to gain traction. Analysts at William Blair also reiterated an Outperform rating, describing Open USD as a solution searching for a problem.
FAQ
What did Mizuho do to Circle's stock rating?
Mizuho downgraded Circle (CRCL) to Underperform from Neutral and reduced its price target to $50 from $85, citing competitive pressure from Open USD on USDC's economics.
How does Open USD's revenue model differ from Circle's USDC model?
Circle retains roughly 38% of reserve income after sharing revenue with partners, while Open USD uses a pass-through model that routes nearly all reserve yield to distributors and keeps only a small management fee.
What is the significance of the Hyperliquid partnership according to JPMorgan?
JPMorgan cited Circle's revised USDC partnership with Hyperliquid as evidence that distributors are securing more favorable economics, with Coinbase receiving all reserve income tied to Hyperliquid's $6 billion USDC balance before returning roughly 90% of the yield to the DEX.
