JPMorgan Chase & Co., the largest bank in the world by market capitalization, has sounded the alarm about Coinbase and Circle’s USDC-based revenue in their partnership with Hyperliquid.
USDC alliance expected to slash Coinbase and Circle earnings
According to the bank’s July 2026 report, the partnership among the three crypto players creates a prisoner’s dilemma. Essentially, Coinbase and Circle are competing for the distribution of the stablecoin to increase their revenue.
“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 drives Coinbase and Circle to compete with each other when promoting USDC distribution,” analysts led by Kenneth Worthington said in the Tuesday report.
Hyperliquid is currently the largest decentralized exchange, boasting over $150 billion in processed transactions this July. In the same month, the Hyperliquid-Binance volume ratio officially surpassed the 11.89% milestone, following a 47% month-over-month surge in Hyperliquid’s trading volume. At present, Hyperliquid holds about $6 billion in USDC, or about 8% of the stablecoin’s circulating supply.
Two months ago, the trio entered into an agreement in which Coinbase became the official USDC liquidity manager on Hyperliquid. Meanwhile, Circle managed cross-chain infrastructure and minting to reduce third-party risk.
In return, Coinbase would route 90% of the stablecoin yield back to Hyperliquid. The exchange then uses these funds to conduct regular HYPE token buybacks, thereby boosting the token’s value. This arrangement overturned a previous contract in which Coinbase split nearly all of the stablecoin’s revenue evenly with Circle.
More reasons for lower returns
Weaker crypto markets have also cut stablecoin yields, with USDC supply now down to $73 billion from around $80 billion in March. Even more, the crypto industry is continuously incorporating regulated stablecoins, chipping away at Circle’s USDC’s previous dominance.
Japanese investment bank Mizuho notes that while Circle’s approval to open a bank is positive, investors may be overvaluing it.
Whether JPMorgan’s warnings hold any weight remains to be seen once Coinbase and Circle release their Q2 earnings reports on July 30 and August 11, respectively.
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