USDC’s 72% surge exposed the expensive truth behind Circle’s stablecoin dominance

Here is the latest from the digital-asset markets: 4 billion in distribution costs connected to Coinbase in 2025, up from $924. 5 million the year before, according to the company's own 10-K filing. Those distribution costs equaled roughly 51% of its total 2025 revenue and reserve income.

USDC circulation grew 72% year over year to $75. 3 billion in the fourth quarter, and full-year revenue and reserve income climbed 64% to $2. Circle retained a 39% margin after distribution and transaction costs, unchanged from 2024 even as growth accelerated.

Market Dynamics

A chart shows Circle's revenue growing from $1. 7 billion between 2024 and 2025 while its RLDC margin held flat at 39%. Distribution and transaction costs consumed roughly 63% of Circle's fourth-quarter reserve income.

The pressure now extends beyond the Coinbase agreement, as alternative stablecoin models and trading venues seek a larger share of the reserve income generated by the USDC they distribute. Circle and Coinbase entered into their current collaboration agreement in August 2023, with an initial three-year term that ends in August 2026. The filing said Circle and Coinbase will discuss in good faith whether modifications are warranted before the initial term expires.

If they do not agree to changes, the agreement automatically renews for another three years, provided both sides continue meeting their obligations. Coinbase remains USDC's largest centralized distribution partner and is also a participant in Open USD, a rival stablecoin model built by a consortium that includes Visa, Mastercard, and more than 140 other businesses. Open USD shares reserve earnings with consortium members after deducting a management fee, giving Coinbase another benchmark for how stablecoin economics can be divided among distribution partners.

Market Impact

Where Hyperliquid fits in Hyperliquid supplies the decentralized version of the same squeeze. USDH, launched by Native Markets as Hyperliquid's native stablecoin, failed to displace USDC's liquidity advantage. Coinbase has said USDC stays the leading stablecoin on Hyperliquid, with roughly $5 billion in circulation there, and DeFiLlama puts USDC's dominance of Hyperliquid's stablecoin base near 97%.

USDC's dominance didn't stop Hyperliquid from extracting a price for it, as the protocol's AQAv2 framework now directs roughly 90% of cost-adjusted reserve-yield revenue tied to aligned stablecoin supply back to Hyperliquid itself. Assuming the entire $6. 16 billion stablecoin base qualifies as aligned supply and earns a 3.

5% reserve yield, it would generate about $215. 6 million in annual gross reserve income. A simple 90% calculation produces roughly $194 million, though the framework's cost adjustments mean the actual amount would differ.

Crypto markets are watching this development closely as investors weigh its potential impact on prices.