Mizuho, JPMorgan Turn Bearish on Circle as USDC Economics Come Under Pressure

Investment bank Mizuho downgraded Circle (CRCL) to underperform from neutral. The bank also cut its price target for the stock, citing threats from Open USD.

The downgrade landed as JPMorgan also lowered its Circle and Coinbase (COIN) estimates. Both banks pointed to mounting pressure on the economics behind USDC (USDC).

Open USD Rattles Circle’s Model

The Japanese bank slashed its price target to $50 from $85, a cut of more than 41%. From Circle’s current price of $63.22, the new target points to roughly 21% downside.

Mizuho analyst Dan Dolev sees Open USD as the biggest threat. The dollar-backed token launched on June 30. It is backed by more than 140 companies, including Visa, Mastercard, and Coinbase. 

The rival token lets businesses mint and redeem for free while partners keep the reserve earnings after a small fee. That design diverges from Circle’s model. According to Dolev,

“…could fundamentally alter CRCL’s business model, which relies on retaining a large portion of the treasury yield to drive revenues…We believe that over time, distribution partners will be emboldened to demand more from CRCL.” 

Meanwhile, Mizuho also raised its 2027 distribution and transaction cost estimate to 73% from 64%. It cut 2027 adjusted EBITDA to $699 million from $1.09 billion.

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JPMorgan Flags a Hyperliquid ‘Prisoner’s Dilemma’

JPMorgan also struck a cautious tone, flagging mounting strain on the economics behind Circle’s USDC. Analysts led by Kenneth Worthington cut forecasts for Circle and Coinbase, per Bloomberg.

The bank flagged the revised revenue-sharing deal with Hyperliquid. Worthington said the structure pushes the two partners to compete against each other.

“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,” Worthington said.

The bearish outlook holds as the stock continues to face pressure amid a broader crypto downturn. CRCL has fallen more than 20% this year. Shares closed slightly higher at $63.22 on Tuesday.

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