Mizuho has downgraded Circle (CRCL) to underperform from neutral and slashed its price target to $50 from $85 — a 41% cut. The bank cited mounting pressure on the economics behind USDC, the stablecoin that powers much of Circle's revenue. JPMorgan also lowered its estimates for Circle and Coinbase, pointing to a competitive squeeze that could reshape the stablecoin market.
Open USD emerges as the biggest threat
The trigger is Open USD, a dollar-backed token launched in late June. It's backed by more than 140 companies, including Visa, Mastercard, and Coinbase. Mizuho analyst Dan Dolev called Open USD the biggest threat to Circle's model. Unlike USDC, Open USD allows free minting and redemption. Partners keep the reserve earnings after paying a small fee — a structure that could undercut Circle's revenue stream.
Mizuho now expects Circle's distribution and transaction costs to hit 73% of revenue by 2027, up from a prior estimate of 64%. That shift eats into profitability. The bank cut its 2027 adjusted EBITDA forecast for Circle to $699 million from $1.09 billion.
JPMorgan flags a 'prisoner's dilemma'
JPMorgan analysts also lowered their estimates, pointing to a revised revenue-sharing deal tied to Hyperliquid. They described the situation as a 'prisoner's dilemma' — the new arrangement forces Circle and Coinbase to compete more directly, squeezing margins for both. The dynamic could accelerate the shift of liquidity away from USDC toward newer, cheaper alternatives.
Stock under pressure
Circle's stock has fallen more than 20% this year. It closed at $63.22 on Tuesday, well below the $85 target Mizuho just abandoned. The downgrade adds to a growing list of headwinds for the company, which has seen its market share in stablecoins erode as competitors offer lower fees and more flexible terms.
The question now is whether Circle can adapt its business model fast enough. With Open USD gaining backing from major payment networks and exchanges, the pressure on USDC's economics isn't likely to ease soon. Circle hasn't announced any changes to its fee structure or partnership terms.
