Jefferies Warns on Circle: Open USD Competition Risk Not Fully Priced In
Alina Collins
Jefferies explicitly advises against buying the dip in Circle, arguing that the 140-plus-member Open USD alliance is squeezing USDC on both distribution and yield-sharing — and the stock's 17% drop has yet to fully price in this structural threat.
Why did Circle drop 17% in a single day?
The trigger was the launch of the Open USD alliance — backed by Stripe, Mastercard, Visa, Coinbase, BlackRock and over 140 other institutions, with a plan to share reserve yield with participants and pull in payment firms and fintechs.
This means → the new entrants are not starting from scratch. They bring massive existing distribution networks, the very moat Circle spent years building.
Jefferies notes the subsequent 5% bounce does not clear the risk. The current price still underestimates how fast the competitive landscape is deteriorating.
How fragile is Circle's revenue structure?
Circle holds roughly 25% of the ~$300 billion stablecoin market, but its revenue is extremely concentrated: about 95% comes from interest on USDC reserves.
In plain terms = it makes almost all its money one way — investing users' deposited dollars in Treasuries and collecting the yield. If market share shrinks, revenue drops in lockstep.
The sharper risk signal: Coinbase is USDC's largest distribution channel, yet Coinbase has also joined the Open USD alliance. Their commercial agreement reportedly expires for renewal in August. If Coinbase pivots to promoting a rival stablecoin, the blow to USDC would be foundational.
How does Circle's CEO push back?
CEO Jeremy Allaire responded on social media, arguing that stablecoins are a network business built over years, not a product that can be replicated overnight.
He cited USDC's moat: thousands of ecosystem integrations, deep liquidity across exchanges and DeFi protocols, and regulatory licenses secured in Europe, Japan and other markets.
On the alliance's "yield-sharing" pitch, Allaire countered that Circle already distributes most of its yield to partners, warning that "giving away all revenue is a way to starve the infrastructure."
Can a 140-member alliance actually coordinate?
Lorenzo Valente, head of digital-asset research at ARK Invest, is skeptical. He pointed to multiple past consortium-style stablecoin efforts — Meta's Diem, Paxos-led Global Dollar Network — none of which scaled.
He compared the coordination challenge of 140-plus participants to the governance struggles of a DAO (decentralized autonomous organization), stating bluntly: "'Owned by everyone' almost always means owned by no one."
This reflects a deeper industry pattern: large-institution alliances carry enormous coordination costs and misaligned incentives. Historically, single operators have been more likely to break through.
What to watch next?
The August Coinbase agreement renewal is the first critical checkpoint — the terms will directly determine whether USDC's largest distribution channel stays in place.
Whether the Open USD alliance can achieve effective coordination among over a hundred competing members is the second observation window.
In plain terms = Circle's fate is not entirely in its own hands. The channel (Coinbase) and the rival (Open USD) are both moving at once — a shift on either side could reprice this stock.
Content is for reference only, not financial advice.