Mizuho Downgrades Circle to Underperform, Cuts Price Target to $50 on USDC Margin Risks

Circle is facing renewed scrutiny from Wall Street after Japanese investment bank Mizuho downgraded the stablecoin issuer from Neutral to Underperform and slashed its price target from $85 to $50.

The bank cited growing concerns that rising competition could fundamentally weaken the economics behind USDC.

The downgrade reflects a broader debate emerging across the stablecoin industry: as new entrants compete by sharing more of their reserve income with partners, can Circle continue to generate the high margins investors have come to expect?

Mizuho believes the answer is becoming less certain, particularly following the launch of OpenUSD, a new stablecoin initiative backed by more than 140 companies.

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Mizuho Warns OpenUSD Could Reshape Stablecoin Economics

According to a CoinDesk report citing analysts led by Dan Dolev, Mizuho believes OpenUSD’s business model could significantly alter how reserve income is distributed across the stablecoin ecosystem.

Unlike Circle’s current structure, where reserve income is earned first before portions are shared with distribution partners, OpenUSD plans to distribute the majority of reserve earnings directly to issuers and ecosystem participants after deducting only a small management fee.

Japanese Financial Giant Downgrades Circle to Underperform, Cuts Price Target From $85 to $50

Japanese investment bank Mizuho downgraded Circle from Neutral to Underperform and cut its price target from $85 to $50. The bank said OpenUSD’s model of distributing most reserve… pic.twitter.com/muZ3nOzOiw

— Wu Blockchain (@WuBlockchain) July 15, 2026

That approach, Mizuho argues, could force Circle to offer more attractive revenue-sharing agreements in order to retain key partners.

As a result, the bank increased its estimate for Circle’s 2027 distribution and transaction expense ratio from 64% to 73%, reflecting expectations that a greater share of reserve income will flow to partners rather than remaining on Circle’s balance sheet.

The impact on profitability could be significant.

Mizuho reduced its forecast for Circle’s 2027 adjusted EBITDA from $1.09 billion to $699 million, roughly 25% below Wall Street consensus, according to the report.

Although higher interest rates continue supporting reserve income generated by USDC reserves, analysts believe stronger competition could increasingly offset those benefits by compressing margins.

Coinbase Relationship Comes Into Focus

One of Mizuho’s biggest concerns centers on Circle’s relationship with Coinbase.

The two companies have long shared the economics of USDC distribution, but that agreement is expected to be renegotiated later this summer.

Coinbase’s participation in the OpenUSD ecosystem could strengthen its negotiating position during those discussions, potentially enabling it to demand a larger share of Circle’s reserve income.

To put in perspective how big of a bet Coinbase and Circle made on Hyperliquid when they agreed to share 90% of reserve yield with HL, JPMorgan analysts are writing bear thesis’ for COIN and CIRC as we speak.

The first tranche of reserve yield starts accruing in 6 weeks. pic.twitter.com/H8R5EYXjvL

— steven.hl (@_stevenhl) July 14, 2026

The concerns follow another recent warning from JPMorgan.

Earlier this month, JPMorgan lowered earnings estimates for both Circle and Coinbase after the companies agreed to new revenue-sharing terms with Hyperliquid.

Under that arrangement, Coinbase will reportedly pass 90% of the USDC reserve yield generated on the platform to Hyperliquid, reducing the economics retained by both Circle and Coinbase, even if USDC adoption continues to grow.

Taken together, analysts increasingly see revenue-sharing dynamics, not stablecoin demand itself, as the primary variable investors should monitor.

Circle Continues Expanding Despite Profitability Concerns

Despite growing skepticism about margins, Circle continues to strengthen USDC’s global infrastructure.

The company received final approval to establish Circle National Trust, a federally regulated trust entity that will initially provide custody services for Circle and its affiliates before potentially expanding to institutional clients.

International expansion also remains a priority.

Circle also announced a partnership with JCB, Japan’s largest credit card network, to pilot USDC-based treasury transfers and explore future merchant payment applications in Japan.

Circle has received final OCC approval to establish First National Digital Currency Bank, N.A., a national trust bank operating as Circle National Trust.

A major U.S. regulatory milestone that strengthens USDC infrastructure through federally regulated custody, with reserve… pic.twitter.com/GtThvFV5aW

— Circle (@circle) July 10, 2026

USDC circulation currently stands at approximately $73 billion, down modestly from around $77 billion at the end of the first quarter but still maintaining its position as the world’s second-largest dollar-backed stablecoin.

Meanwhile, OpenUSD continues building momentum with support from more than 140 ecosystem participants, including Coinbase, Mastercard, Stripe, and BlackRock.

USDC circulating supply. | Credit: Glassnode

Whether the project can challenge USDC’s liquidity and distribution network remains uncertain. However, its partner-first revenue model is already influencing investor expectations.

For Circle, the challenge may no longer be simply growing USDC adoption. Instead, the company must prove it can defend its margins in a market where distribution partners increasingly have alternative stablecoin ecosystems competing for their business.

Mizuho Downgrades Circle to Underperform, Slashes Price Target on Margin Concerns

Mizuho Warns OpenUSD Could Reshape Stablecoin Economics

Coinbase Relationship Comes Into Focus

Circle Continues Expanding Despite Profitability Concerns

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