JPMorgan: US Stablecoin Rivalry Enters Zero-Sum Liquidity Battle

JPMorgan analysts have issued a warning that Circle’s USDC stablecoin faces intensifying competition from new entrants, including Tether’s fully U.S.-compliant USAT, Hyperliquid’s USDH, and stablecoins from fintech firms like Robinhood and Revolut. The bank’s report highlights a rapidly evolving stablecoin landscape, where regulatory changes and strategic innovations threaten to erode USDC’s dominance in the U.S. market. The stablecoin sector, valued at approximately $278 billion as of mid-2025, has remained a stagnant 8% of the broader cryptocurrency market since 2020, raising concerns that new competition may merely redistribute market share rather than expand the overall pieCircle’s USDC at Risk? JPMorgan Warns of Intense Stablecoin War …^[1].

Tether’s upcoming USAT stablecoin is positioned as a direct challenger to USDC, leveraging compliance with the newly enacted GENIUS Act to attract institutional investors. Unlike Tether’s existing USDT, which analysts estimate is only 80% compliant with U.S. regulations, USAT will be fully backed by reserves held at Anchorage Digital, a federally chartered bank. This approach aims to mitigate risks akin to those Circle faced during the 2023 Silicon Valley Bank collapse while reducing operational costs and improving profit marginsCircle’s USDC at Risk? JPMorgan Warns of Intense Stablecoin War …^[1]. JPMorgan’s Nikolaos Panigirtzoglou noted that USAT’s institutional focus could shift liquidity away from USDC, particularly as demand for regulated stablecoins growsJPMorgan Predicts Intense Competition for Circle in Stablecoin^[3].

Hyperliquid, a crypto derivatives exchange, is also set to launch USDH, a native stablecoin that could directly impact USDC’s market share. The exchange already accounts for 7.5% of USDC usage, and the introduction of USDH is expected to accelerate this trend. JPMorgan analysts emphasized that platforms like Hyperliquid are increasingly developing their own stablecoins to reduce dependency on third-party issuers, a strategy that could fragment the market furtherCircle’s USDC at Risk? JPMorgan Warns of Intense Stablecoin War …^[1]. Meanwhile, fintech giants such as Robinhood and Revolut are preparing their own stablecoin offerings, intensifying the battle for user adoption and liquidityU.S. Stablecoin Battle Could Be Zero-Sum Game: JPMorgan^[2].

Circle is not standing idle. The company is building Arc, a dedicated blockchain optimized for USDC transactions, to enhance speed, security, and interoperability. Arc aims to position USDC as a central pillar of digital finance despite growing competition. However, JPMorgan cautioned that without broader expansion of the crypto market, Arc’s efforts may not be enough to offset the zero-sum dynamics emerging among U.S. stablecoin issuersCircle’s USDC at Risk? JPMorgan Warns of Intense Stablecoin War …^[1]. The bank noted that USDC’s supply has surged to $72.5 billion, outpacing Bernstein’s 2025 estimates by 25%, but this growth may plateau as rivals gain tractionU.S. Stablecoin Battle Could Be Zero-Sum Game: JPMorgan^[2].

The analysts concluded that the stablecoin market is likely to remain a zero-sum contest for U.S. issuers unless the crypto sector experiences significant growth. Historical data shows stablecoin supply has closely tracked the overall crypto market cap, which has limited expansion of the stablecoin segment. With the market already saturated and regulatory scrutiny increasing, JPMorgan warned that competition will likely focus on capturing existing liquidity rather than fostering new demandJPMorgan Predicts Intense Competition for Circle in Stablecoin^[3].