Circle faces rising pressure on USDC economics as Wall Street cuts outlook

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Circle USDC outlook cut

Highlights

Mizuho downgrades Circle to Underperform from Neutral and cuts price target to $50 from $85, citing rising competitive threats from Open USD.
JPMorgan notes new USDC arrangement with Hyperliquid allocates all reserve income to Coinbase, highlighting intensifying pressure on Circle's revenue-sharing model as $6 billion USDC moves under the scheme.
Despite competitive risks, Bernstein and William Blair maintain Outperform ratings and $190 target for Circle, citing liquidity strength and regulatory advantage over new entrants like Open USD.

Analyst downgrades highlight margin risks

Mizuho and JPMorgan both flag mounting pressure on Circle's USDC business model, with The Block reporting that the concerns center on how reserve income is shared across distribution partners.

Mizuho downgrades Circle to Underperform from Neutral and cuts its price target to $50 from $85. Analyst Dan Dolev identifies Open USD, a new dollar-backed stablecoin supported by a consortium of more than 140 financial, technology and crypto companies including Visa, Mastercard, Stripe, BlackRock and Coinbase, as a key competitive threat.

Unlike Circle's model, where the company retains about 38% of reserve income after sharing revenue with partners such as Coinbase and Binance, Open USD uses a pass-through structure that sends nearly all reserve yield to distributors while keeping only a small management fee. Mizuho says that model could pressure Circle to give up a larger share of reserve income to remain competitive.

Mizuho also points to Circle's revenue-sharing agreement with Coinbase, its largest USDC distribution partner, which is expected to come up for renewal next month. Because Coinbase is also a founding member of Open USD, the exchange could gain added leverage in negotiating new terms.

Stablecoin competition splits broader market view

JPMorgan reaches a similar conclusion from a different angle, pointing to Circle's revised USDC partnership with the Hyperliquid decentralized exchange as a sign that distributors are already securing more favorable economics.

Under the new arrangement, Coinbase receives all reserve income tied to Hyperliquid's USDC balances before returning roughly 90% of the yield to the decentralized exchange. JPMorgan describes the setup as a prisoner's dilemma that encourages Circle and Coinbase to compete on revenue-sharing terms to retain partners. The bank says Hyperliquid holds about $6 billion in USDC, equal to roughly 8% of circulating supply.

Not all analysts share the negative view. After the Open USD launch earlier this month, Bernstein reiterates an Outperform rating and a $190 price target on Circle, arguing that the new consortium supports the case for stablecoins as a growing asset class rather than creating a major competitive threat.

William Blair analysts also reiterate an Outperform rating, saying Open USD is a solution searching for a problem. They argue that Circle's liquidity position, regulatory lead and network effects remain difficult for rivals to replicate, even as pricing pressure in the sector increases.

In our earlier article on JPMorgan’s AI rollout, we explained that the bank is already applying artificial intelligence across nearly 1,000 use cases and has reduced headcount by 30%–40% in some units. However, management stressed that competitive pressure is keeping most efficiency benefits flowing to customers rather than translating into meaningful margin expansion, even as AI-related spending is expected to rise over time.

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