Mizuho Downgrades Circle as OpenUSD Puts Pressure on USDC
Mizuho downgraded Circle to “underperform” and cut its price target from $85 to $50. The issue is not vague “competition.” It is OpenUSD’s business model, which could put more pressure on Circle’s profits than investors expected. My take: this is the part the market was too relaxed about. Circle is not a small side bet in crypto. $USDC sits underneath a lot of trading activity, and its circulating supply has dropped from nearly $80 billion in March to about $73 billion recently.
Circle shares were down 0.6% at $62.63 when the report was published. Mizuho’s concern is Open USD, a dollar-backed stablecoin launched June 30 by the Open Standard consortium. The group has more than 140 partners, including Mastercard (MA), Stripe, Coinbase (COIN), and BlackRock (BLK). Analysts led by Dan Dolev said Open USD could “fundamentally alter CRCL’s business model.” Put simply, Circle keeps much of the yield from the Treasuries backing USDC. OpenUSD is built to make that harder. That’s the whole trade.
The timing is rough. The stablecoin market has shrunk by roughly $10 billion since May as crypto trading cooled and new regulated issuers entered the market. Why does this matter? Because less stablecoin supply usually means less cash sitting on-chain, ready to move into crypto. That matters for $BTC and $ETH, which rely on deep stablecoin trading pairs. It is not a perfect signal. Crypto rarely gives you one. Still, I would not wave this away as noise.
Circle’s $USDC model starts with reserve income, then shares part of that income with partners such as Coinbase and Binance. Open USD changes the split. It charges a small operating fee, then sends most reserve income back to issuers and distributors. Most stablecoin coverage frames this as a market-share fight. That’s only half right. The nastier question is whether Circle’s own partners start demanding a larger slice of the reserve income. If OpenUSD gains traction, they can ask for more money. Circle is already expected to renegotiate its revenue-sharing agreement with Coinbase, its largest distribution partner, in August. Coinbase’s role in OpenUSD gives it a stronger hand.
This is not just a fight between two stablecoins. It is a fight over who gets paid for the reserves behind them. The Open Standard consortium has major financial firms and crypto exchanges behind it, so distribution could come quickly. Is this overkill as a concern? For a stablecoin tied into $BTC, $ETH, exchange balances, and DeFi collateral, no. More competition could lower costs. It could also spread liquidity across more stablecoins, leaving thinner trading pairs and messier DeFi collateral. Mizuho raised its 2027 estimate for Circle’s distribution and transaction costs from 64% to 73%. It also cut its adjusted EBITDA forecast from $1.09 billion to $699 million. That new estimate is about 25% below the $941 million analyst consensus. That is not a rounding error.
Circle has another problem. JPMorgan said in a Tuesday report that Hyperliquid’s deal with Circle and Coinbase creates a “prisoner’s dilemma,” adding more pressure to earnings from the dollar-pegged stablecoin. Counter to the usual advice, higher rates are not automatically enough to save the model here. Mizuho expects interest rates to be somewhat higher in 2027, but not high enough to offset the pricing pressure. That is the uncomfortable part for $USDC. It has been one of crypto’s main trading rails for years. The economics around it now look less protected. I’ll be honest: that is a real change in tone.
What this means
The downgrade points to a specific problem for Circle: OpenUSD is going after the revenue model, not just market share. If reserve income moves toward distributors, other stablecoin issuers may have to revisit their own deals. Yes, this slightly cuts against the clean “USDC is infrastructure” story. Infrastructure can still get repriced. Crypto investors should watch reserves and partner agreements. They should also watch the economics behind the stablecoins they use. A weaker $USDC could affect liquidity for $BTC and $ETH, as well as DeFi protocols that use $USDC as collateral or a trading pair.
The next date to watch is August, when Circle is expected to renegotiate its revenue-sharing deal with Coinbase. That negotiation should show how much leverage OpenUSD has already created. $USDC supply is another clean signal. If it keeps falling, traders may be moving to other stablecoins. We tried to find a cleaner tell than supply, but this is still the one that cuts through the noise fastest. Also watch the Open Standard consortium for new partners or broader exchange support. A few large announcements could put more pressure on Circle and make stablecoin trading pairs more volatile across exchanges.