Mizuho Downgrades Circle to Underperform, Slashes Target Price to $50
Claire Weston
Mizuho cut Circle (CRCL) to Underperform and halved its price target to $50 from $85 — arguing that Open USD's pass-through revenue model poses a structural threat to Circle's core interest-retention business.
How does Circle make money, and why is that model under fire?
Circle issues the USDC stablecoin, parks user deposits in U.S. Treasuries, and keeps most of the interest income — that is the entire profit engine.
Open USD flips the economics: it charges a small operating fee and passes the bulk of reserve yield back to issuers and distributors. This means → if the market embraces this pass-through model, Circle's margin on retained interest shrinks dramatically.
In plain terms = Circle has been earning the middleman spread; Open USD hands that spread back to partners, undermining Circle's pricing power at its foundation.
What do Mizuho's numbers actually show?
Mizuho raised its 2027 distribution-and-transaction cost ratio for Circle from 64% to 73% — a larger share of every dollar earned goes out the door.
Adjusted EBITDA was cut from $1.09 billion to $699 million, roughly 25% below the Street consensus of $941 million.
The bank added that even if 2027 rates run higher than expected, the extra reserve income cannot offset the margin pressure. This reflects a view that the threat is structural, not cyclical.
Why should anyone take Open USD seriously?
Open USD launched on June 30 via the Open Standard consortium and has already attracted more than 140 partners, including Mastercard, Stripe, Coinbase, and BlackRock.
This means → it is not a whitepaper-stage concept but a project with real backing from major payment networks and asset managers.
The critical detail: Coinbase is Circle's biggest distribution partner and an Open USD backer — a role conflict that is already in the open.
Where does the pressure come from — Coinbase talks and USDC shrinkage?
Circle's revenue-sharing agreement with Coinbase is up for renegotiation in August. Coinbase now holds the Open USD card, strengthening its bargaining position and potentially squeezing Circle's margins further.
USDC circulation has dropped from nearly $80 billion in March to roughly $73 billion — a decline of about $7 billion.
Mizuho notes the broader stablecoin market has contracted by roughly $10 billion since May, as softer crypto trading and rising competition from newly licensed issuers weigh on USDC's growth.
Can a banking charter offset any of this?
Circle won approval last week from the U.S. Office of the Comptroller of the Currency to establish a national digital-currency trust bank, bringing USDC under a federal regulatory framework — a clear positive on paper.
JPMorgan, in a separate same-day note, flagged that Hyperliquid's partnership with Circle and Coinbase creates a "prisoner's dilemma" that adds further pressure to USDC's profit structure.
In plain terms = the regulatory box is checked, but competitors are using the same compliant framework to grab market share. Whether Open USD can scale enough to take USDC share and the outcome of August's Coinbase negotiation are the two key tests for Mizuho's bearish call.
Content is for reference only, not financial advice.