Mizuho downgraded stablecoin issuer Circle (CRCL) to Underperform from Neutral and cut its price target to $50 from $85, arguing that the business model behind Open USD (OUSD) could threaten Circle’s profitability.
Open USD’s model puts Circle’s reserve-income structure in focus
The concern centers on Open USD, a dollar stablecoin launched on June 30 by the Open Standard consortium. In a Tuesday report, Mizuho analyst Dan Dolev said the product could upend the foundation of Circle’s earnings model.
Circle has depended heavily on keeping most of the income generated from reserves. The company invests customer dollars in reserve assets such as U.S. Treasuries, earns interest, and then shares only part of that income with partners including Coinbase and Binance.
Open USD takes a different approach. According to the report, it charges only a thin operating fee and passes most reserve income back to issuers and distributors.
Mizuho also highlighted the consortium’s backing. The group includes more than 140 partners, among them Mastercard, Stripe, Coinbase and BlackRock.
Circle shares have fallen more than 24% over the past month
Since Open USD emerged in early July, Circle shares have faced sustained pressure. The stock was up 0.35% on Tuesday at $63.22, but it has still dropped more than 24% over the past month.
Even so, not all investors pulled back. Recent trading disclosures show that ARK Invest bought 220,000 Circle shares on Tuesday through three ETFs: ARKK, ARKW and ARKF. Based on Tuesday’s closing price, the purchase was worth about $13.9 million.
Profit-sharing pressure may build ahead of Coinbase talks
Mizuho said Open USD’s revenue-sharing structure could create mounting pressure on Circle as distribution partners push for a larger slice of profits over time.
The next key point comes in August, when Circle is set to renegotiate its profit-sharing agreement with Coinbase, its largest distribution partner. The report said Coinbase’s support for Open USD may give it more leverage to demand a higher share.
The bank also pointed to softer USDC growth. Circulating supply now stands at about $73 billion, down from a peak near $80 billion in March.
Since May, the broader stablecoin market has contracted by roughly $10 billion as crypto trading activity cooled and more regulated stablecoin issuers entered the market, according to the report.
Mizuho cuts its 2027 earnings outlook
With future revenue sharing potentially changing, Mizuho raised its estimate for Circle’s 2027 distribution and transaction costs to 73% from 64%. It also cut its adjusted EBITDA forecast to $699 million from $1.09 billion.
JPMorgan issued a warning of its own in a Tuesday research note. The bank said an earlier agreement involving decentralized perpetuals exchange Hyperliquid, Circle and Coinbase had already created a “prisoner’s dilemma” in the market and would keep weighing on USDC profitability.