Just now! Circle and Coinbase team up to "surrender," USDH drops to zero, USDC unifies Hyperliquid hidden dangers?

On the evening of May 14 Beijing time, three announcements completely changed the Hyperliquid ecosystem. Coinbase, Circle, Hyperliquid, and its native stablecoin $USDH’s deployer Native Markets all issued statements, declaring the end of the native stablecoin plan that had lasted for 8 months.

Hyperliquid officially abandons $USDH, embracing USDC as the sole settlement asset. Native Markets stated in their announcement that Coinbase and Circle acquired the “$USDH brand assets,” and Native Markets will continue to operate independently and start the “next chapter.”

Basically, this is a “shell swap” game—replacing Hyperliquid’s native stablecoin from $USDH with USDC, but the profit-sharing mechanism remains almost unchanged: 90% of the staking rewards and reserve asset yields flow into the Hyperliquid ecosystem. Hyperliquid calls this AQAv2.

AQAv2 requires Coinbase to stake 500k $HYPE tokens, responsible for reserve management and ensuring reserve yield sharing for AQAv2 (i.e., USDC); Circle also needs to stake 500k $HYPE tokens, deploying on-chain native USDC, CCTP V2, and other cross-chain infrastructure.

Compared to AQAv1, v2 significantly increases profit-sharing requirements. V1 only distributed 50% of reserve yields to Hyperliquid but offered trading fee discounts to traders using $USDH; v2, while removing fee discounts, directs 90% of the yields to Hyperliquid.

On-chain data reveals the true nature of this deal: $USDH’s peak circulation was only about $100 million. As of March 31, the circulating supply was just 90 million tokens. Meanwhile, the USDC circulation within the Hyperliquid ecosystem remains stable at around 5 billion tokens, with only a negligible amount switching from USDC to $USDH.

Initially, Hyperliquid wanted to keep the stablecoin issuance rights within the ecosystem, sharing reserve yields and avoiding the ecosystem working for the stablecoin issuer. At that time, Paxos, Frax, Sky (formerly MakerDAO), Ethena Labs, and others competed for the $USDH issuance rights, but Native Markets, deeply involved in Hyperliquid, unexpectedly won.

Everyone’s focus was on “who can bring more revenue to Hyperliquid,” but they overlooked a critical issue: who can truly get users to use $USDH? Native Markets failed at the product level, but market analysts point out that even if another entity takes over, the outcome might be the same.

Many analysts on X platform believe that Native Markets is using $USDH as a bargaining chip, forcing Coinbase and Circle to stake 500k $HYPE and cede 90% of the profits. This logic makes some sense—since $USDH failed to prevent USDC’s usage, Circle has no reason to “lose money.”

But explaining it solely as a “chip” seems weak. As early as September last year, I argued that even if Hyperliquid is lost, Circle has other protocols to choose from, and can sacrifice some revenue like in the partnership with Coinbase to gain distribution channels. In the short term, $USDH causes some pain for Circle, but in the long run, who will be the last to laugh?

The simple truth is: Hyperliquid’s goal isn’t to pocket stablecoin profits but to promote ecosystem growth through profit sharing and token buybacks. For founder Jeff, it’s more about how big Hyperliquid can become.

I believe Coinbase and Circle’s involvement wasn’t just “negotiation,” but more like a “proactive embrace.” Both companies’ Q1 financial reports reveal pain points with USDC’s flagship product: Circle faces declining interest rates, making increased issuance urgent; Coinbase has seen continuous quarterly growth in USDC distribution costs exceeding revenue growth, making increased issuance also a top priority.

Circle’s Q1 report shows USDC’s on-chain trading volume was about $21.5 trillion in a single quarter, while issuance was less than 80 billion tokens, indicating that everyday consumer use doesn’t require that much currency. Expanding use cases is one goal; increasing issuance is the other.

Robinhood’s Q1 report shows its user-held funds amount to about $45.7 billion, with total platform assets reaching $345.4 billion. In contrast, Hyperliquid’s figure is $5 billion. Coinbase and Circle’s aggressive expansion into Hyperliquid is essentially betting that their future funds will continue to grow significantly.

If Hyperliquid reaches one-third of Robinhood’s scale in the future, USDC issuance could rival the current size of USDT. More importantly, unlike consumer transactions, trading requires real money to mint USDC and transfer it into Hyperliquid—this is where the actual increase in issuance occurs.

Because if you don’t have USDC, you can pay with fiat or barter, but on Hyperliquid, USDC is the only settlement asset. If that day truly arrives, whoever Hyperliquid uses will instantly be able to “stand above all others.” Instead of praying that day never comes, it’s better to pre-bind interests and leave the rest to time.

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