Hyperliquid’s New Deal Is Bad News For Circle And Coinbase, According To JPMorgan

A deal that Hyperliquid (HYPE), Coinbase (COIN), and Circle (CRCL) struck together in May is now being cited by JPMorgan as a threat to two of the three parties involved. 

The bank lowered its earnings forecasts for both Circle and Coinbase on Tuesday, saying the arrangement with Hyperliquid undermines USDC’s economics and creates a competitive dynamic that works against the stablecoin’s two main backers.

The Dilemma Hiding Inside The Hyperliquid Deal 

Under the agreement announced on May 14, Coinbase became the official USDC treasury deployer on the Hyperliquid network, with Circle managing the cross-chain infrastructure. 

The arrangement allows Hyperliquid to capture up to 90% of the yield generated by USDC deposits on its platform — revenue the decentralized exchange uses to buy back its native token, HYPE. 

Hyperliquid currently holds approximately $6 billion in USDC, representing roughly 8% of the stablecoin’s total circulating supply, according to JPMorgan estimates.

The bank’s analysts, led by Kenneth Worthington, described the situation as a “prisoner’s dilemma” — a scenario in which two parties are incentivized to compete even when cooperation would produce a better outcome for both. Worthington wrote in the Tuesday report: 

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.

JPMorgan cut earnings estimates for both companies, citing both the Hyperliquid agreement and softer crypto market conditions, though the bank noted that higher interest rates could provide some support for USDC-related revenue over the longer term.

The arrangement is not without risk for Hyperliquid either. Analysts at The Motley Fool previously noted that any Federal Reserve (Fed) rate cuts would reduce the yield income Hyperliquid captures under this structure. 

There is also the risk that USDC’s supply currently on Hyperliquid migrates elsewhere if a competing venue offers better terms, or if a security incident damages confidence in the platform.

Is HYPE Heading To New Price Records? 

Tuesday’s market reaction was mixed. Coinbase shares gained 2% to trade around $160, boosted alongside a broader market recovery after US inflation dropped to 3.5% in June — significantly below the 3.8% consensus — pushing Bitcoin back above $64,000. 

Circle’s stock price remained at $63, with no significant change from Monday’s trading session. Hyperliquid’s native token, HYPE, gained about 1%, surging near $65, which is about 15% below its all-time high of $76. Still, one analyst asserts that this high can be surpassed in the near term.

Yashu Gola of FXEmpire wrote Tuesday that HYPE is testing the lower trendline of a symmetrical triangle pattern, with the support level coinciding with its 50-day exponential moving average (EMA) near $63.15. 

Holding the $62 to $63 support zone could trigger a rebound toward the triangle’s falling resistance at $69 to $70. A confirmed daily close above that level would signal a breakout, with a target near $93 to $95 — approximately 50% above current prices.

Featured image generated with OpenArt.