Open USD Threat Drags Circle Stock Call Down to $50

Mizuho downgrades Circle because the threat is no longer just another stablecoin taking share, it’s a rival model that could force Circle to give away more of the reserve income behind USDC.

Japanese investment bank Mizuho cut Circle to underperform from neutral and slashed its price target to $50 from $85, according to CoinDesk. The call lands squarely on the most sensitive part of Circle’s public-market story: how much stablecoin economics the issuer can keep once distributors realize they have more bargaining power.

Mizuho downgrades Circle as Open USD attacks the USDC profit engine

Mizuho’s argument is blunt. Open USD, a dollar-backed stablecoin unveiled June 30 by the Open Standard consortium, uses a model that passes most reserve income to issuers and distributors after charging a small operating fee, the analysts said.

That challenges Circle’s current setup. Per Mizuho, Circle’s USDC model captures reserve income first, then shares a portion with partners such as Coinbase and Binance.

OpenUSD "could fundamentally alter CRCL's business model, which relies on retaining a large portion of the treasury yield to drive revenues," analysts led by Dan Dolev said in the Tuesday note to clients.

That’s the core tension. If platforms, exchanges, wallets, and fintech partners can get more economics from Open USD, they have a credible reason to push Circle for richer terms. USDC circulation could remain meaningful, but Circle’s retained margin could still weaken.

XOOMAR analysis: this is why the downgrade matters beyond the headline rating change. Mizuho is not only questioning Circle’s growth. It is questioning whether Circle can keep the economics attached to that growth.

The $50 Circle price target rests on a harsher 2027 margin view

The numbers explain the severity of the call. Mizuho cut its 2027 adjusted EBITDA forecast for Circle to $699 million from $1.09 billion. That new estimate is roughly 25% below Wall Street consensus of $941 million, according to the CoinDesk report.

Circle shares were trading 0.6% lower at $62.63 at publication time. Against that price, Mizuho’s $50 target implies the bank sees more downside if Open USD shifts negotiating power away from the issuer.

The key cost line is distribution. Mizuho raised its estimate for Circle’s distribution and transaction costs in 2027 to 73% from 64%. That is the margin squeeze in one number.

Mizuho also said it now expects somewhat higher interest rates in 2027 than previously forecast. That would normally help reserve-yield economics. But the bank’s conclusion is that higher reserve yields would not be enough to offset pricing pressure.

That detail is important. The issue is not only the level of rates. It is who keeps the yield.

Open USD turns distribution into the fight Circle can’t ignore

The Open Standard consortium has more than 140 partners, including Mastercard, Stripe, Coinbase, and BlackRock, according to the report. That roster matters because stablecoins don’t scale through branding alone. They scale through distribution, integrations, liquidity routes, and platform incentives.

Mizuho’s risk case is especially sharp because Coinbase is both Circle’s largest distribution partner and a supporter of Open USD. Circle is preparing to renegotiate its revenue-sharing agreement with Coinbase in August, the report said, and Mizuho warned Coinbase’s support for Open USD could strengthen its negotiating position.

That creates a clean negotiating problem for Circle:

• If Circle protects margins, key partners may ask why Open USD offers better economics.
• If Circle protects distribution, it may have to share more reserve income.
• If Coinbase extracts better terms, other partners may look for similar treatment.

This connects directly with the pressure we covered in Hyperliquid USDC Haul Puts Circle's Margins on Trial, where the question was also not whether USDC had utility, but who captured the value created around it.

CoinDesk also noted a related JPMorgan report saying Hyperliquid’s deal with Circle and Coinbase creates a "prisoner's dilemma" that pressures earnings from the dollar-pegged stablecoin. That phrase fits the broader pattern: individual distribution deals may be rational, while the combined effect can weaken issuer economics.

USDC supply momentum is already softer

Mizuho’s downgrade lands while USDC has lost momentum. The report said USDC circulating supply fell to about $73 billion from nearly $80 billion in March.

The broader stablecoin market has also shrunk by roughly $10 billion since May, amid softer crypto trading activity and growing competition from newly regulated issuers, according to the source material.

Those figures don’t prove Open USD caused the decline. The timing matters, but causation is not established in the report. Still, softer supply momentum gives Mizuho’s margin concern more force. If growth slows while partners demand more economics, Circle faces pressure on both volume and take rate.

For crypto equity investors, that changes the question. Headline USDC circulation is no longer enough. The cleaner metric is retained economics after partner payouts.

That same discipline applies across fintech valuation work. As we wrote in Bankruptcy Spike Jolts 2Q Bank Earnings Credit Nerves, headline revenue can look less reassuring when the underlying quality of earnings comes under pressure. Circle’s issue is different, but the analytical habit is the same: follow the margin mechanics, not just the top-line narrative.

Shareholders and distributors will read the same downgrade differently

Circle shareholders may see Mizuho’s call as a warning that the market had priced USDC like a durable toll business. Mizuho is saying the toll rate may be renegotiated.

Distributors may see something else: leverage. If Open USD proves it can route reserve income more generously to partners, exchanges and fintech platforms can use that model in talks with Circle and other issuers.

Circle still has defenses. USDC remains a major stablecoin, and the source material points to its existing partner network, including Coinbase and Binance. XOOMAR analysis: scale, liquidity, and established integrations can justify premium economics if partners value reliability and reach over the maximum possible yield split.

But the downgrade shows those defenses are no longer assumed to be free. They have to show up in contracts, retention, and margin durability.

Circle’s next test is whether USDC is a moat or a margin target

The next evidence will come from economics, not slogans. Investors should watch Circle’s August Coinbase revenue-sharing renewal, any visible Open USD integrations from its 140-plus partner consortium, and whether Circle’s distribution and transaction costs move closer to Mizuho’s 73% 2027 estimate.

Evidence that would support Mizuho’s thesis: richer partner payouts, weaker USDC circulation, or more platforms adopting Open USD-style economics as a benchmark.

Evidence that would weaken it: Circle retaining major distribution on favorable terms, stabilizing USDC supply, or proving that partners will accept lower pass-through in exchange for USDC’s existing liquidity and relationships.

Circle can still defend a premium position. But Mizuho downgrades Circle because the market is starting to price USDC like a competitive financial product, not a guaranteed margin machine.

Disclaimer: This XOOMAR analysis is for informational and educational purposes only. It is not financial, investment, legal, tax, or professional advice. It does not provide buy, sell, hold, price-target, portfolio, or personalized recommendations. Verify information independently and consult qualified professionals before making decisions.

The Bottom Line

• Mizuho’s downgrade signals concern that Circle may not be able to keep as much USDC reserve income.
• Open USD could give exchanges, wallets, and fintech partners more leverage to demand better economics.
• The price target cut from $85 to $50 reflects a materially weaker view of Circle’s future profitability.