Wall Street wary on Circle as USDC economics come under pressure

Wall Street analysts have grown cautious on Circle after Mizuho downgraded the stock to Underperform and cut its price target to $50 from $85. JPMorgan lowered earnings estimates for Circle and Coinbase. Both firms cited pressure on USDC’s reserve-yield revenue from the newly launched Open USD and shifting revenue-sharing deals with distribution partners.

Mizuho analyst Dan Dolev pointed to Open USD — a dollar-backed stablecoin issued by a consortium that includes Visa, Mastercard, Stripe, BlackRock and Coinbase — as a key challenge to Circle’s reserve income. Mizuho wrote that Circle currently retains about 38% of interest earned on reserves after sharing yields with partners. Open USD uses a pass-through model that routes most reserve yield to distributors while taking a small management fee, and Mizuho said that structure could force Circle to concede a larger share of reserve income to remain competitive.

JPMorgan highlighted a revised USDC arrangement tied to the Hyperliquid decentralized exchange as evidence that distributors are securing more favorable economics. Under that deal, Coinbase receives all reserve income tied to Hyperliquid’s USDC balances and returns roughly 90% of the yield to the exchange, the bank noted. JPMorgan described the setup as a ‘prisoner’s dilemma' that can push Circle and distributors to offer more attractive revenue splits to retain partners. Hyperliquid holds about $6 billion in USDC, approximately 8% of circulating supply, JPMorgan added.

Mizuho also flagged that Circle’s revenue-sharing agreement with Coinbase, its largest USDC distributor, is due for renewal next month. The bank wrote that Coinbase’s role as a founding member of Open USD could give the exchange additional leverage in negotiations.

Some analysts offered a different view. Bernstein maintained an Outperform rating and a $190 price target for Circle, saying Open USD validates demand for stablecoins and noting Circle’s liquidity, regulatory progress and existing network effects. William Blair also maintained an Outperform rating and characterized Open USD as ‘a solution searching for a problem.'

Circle issues USDC, a dollar-backed stablecoin, and earns revenue from interest on the reserves that back the token. Exchanges and trading platforms typically receive a share of that reserve yield in exchange for distributing the coin. Analysts are assessing whether consortium-backed stablecoins and evolving distributor agreements will reduce Circle’s share of reserve returns and affect the company’s revenue and profit outlook.