Could USDH Challenge the Dominance of Circle and USDC? Exploring the Impact on CIRCL Stock

Hyperliquid’s New Stablecoin Threatens Circle‘s USDC Dominance

New York, NY – September 11, 2025 – A potential shakeup is brewing in the stablecoin market as Hyperliquid, a leading decentralized derivatives platform processing over $400 billion in monthly trades, prepares to introduce its own stablecoin, USDH. This move directly challenges the market leadership of Circle’s USDC and signals a shift towards redistributing value within the Hyperliquid ecosystem.

The Rise of Hyperliquid and the Appeal of a Native Stablecoin

Hyperliquid’s decision stems from the significant profits currently generated by stablecoin issuers like Circle and Tether. The exchange believes a platform-specific stablecoin could redirect a portion of these earnings to holders of its native HYPE token. currently, USDC facilitates the vast majority-approximately 95 percent-of trading pairs on Hyperliquid, including popular assets like PUMP and HYPE.

The broader stablecoin market currently exceeds $290 billion in capitalization, with Tether’s USDT controlling roughly 50 percent, or over $169 billion, and USDC holding the second-largest share at over $72 billion, according to Coingecko data. The ease with which USDC can be redeemed for U.S. dollars has made it a cornerstone of the Hyperliquid platform.

The USDH Bidding War

Hyperliquid has outsourced the issuance of USDH to a third party, sparking a competitive bidding process. Several prominent players are vying for the possibility,including Paxos,the issuer of BUSD; Ethena,known for its USDe stablecoin and recent partnership with Binance; Sky,a meaningful name in decentralized money markets; Agora; and Native Markets. Polymarket prediction markets currently favor Native Markets to secure the contract, with validators expected to make a final decision by September 14.

Circle’s Response and Future Strategy

Despite the competition,Circle has expressed no interest in issuing USDH. Rather, Circle CEO Jeremy Allaire announced the company’s intention to deepen its integration with Hyperliquid’s layer-1 blockchain, aiming to eliminate bridging costs associated with transferring assets from Arbitrum. However, Circle is resisting any proposals to share revenue with Hyperliquid. Such a move, Circle maintains, would negatively impact its own shareholders.

Stablecoin	Issuer	Market Share (Approx.)	Key Features
USDT	Tether	50%	Widely Available, Primarily on Tron & Ethereum
USDC	Circle	~25%	Regulated, Easy USD Redemption, Popular on solana & Hyperliquid
USDH (Proposed)	TBD	0% (Pending Issuance)	Potential for Revenue Sharing with HYPE Holders

Did You Know? The GENIUS Act is a U.S. regulatory framework designed to clarify requirements for stablecoin issuers by stipulating tracking of USD reserves on major public blockchains.

Potential Impact on CIRCL Stock

The outcome of the USDH issuance could have significant financial implications. If traders rapidly shift to USDH in anticipation of benefitting from revenue sharing, Circle’s profitability could decline. This risk is amplified by expectations of potential interest rate cuts by the U.S.Federal Reserve, which could further reduce yields on treasury bonds and other holdings. As of September 10,shares of CIRCL were already down 60% from their July highs,and increased turbulence on Hyperliquid could push the stock below $100.

Pro Tip: Keep a close watch on announcements from Hyperliquid validators regarding the USDH issuer selection. This decision will be a critical indicator of the future direction of the platform and its relationship with Circle.

Understanding Stablecoins and Decentralized Finance

Stablecoins are cryptocurrencies designed to maintain a stable value, typically pegged to a fiat currency like the U.S. dollar. They play a crucial role in the decentralized finance (DeFi) ecosystem, providing a stable medium of exchange and facilitating lending, borrowing, and trading activities. The growth of defi has been significant, with total value locked (TVL) in DeFi protocols reaching over $150 billion in early 2024, according to DefiLlama.

Decentralized exchanges like Hyperliquid offer an alternative to conventional centralized exchanges, allowing users to trade cryptocurrencies directly with each other without intermediaries. These platforms rely on automated market makers (AMMs) and order books to facilitate trading and typically operate on blockchain networks like ethereum, Solana, and others.

Frequently Asked Questions About Hyperliquid and Stablecoins

• What is a stablecoin? A stablecoin is a cryptocurrency designed to maintain a stable value,typically pegged to a fiat currency.
• What is Hyperliquid? Hyperliquid is a decentralized derivatives trading platform with a high daily trading volume.
• Why is Hyperliquid launching USDH? Hyperliquid aims to redirect trading profits to HYPE token holders.
• Who is competing to issue USDH? Paxos, Ethena, Sky, Agora, and Native Markets are among the bidders.
• How might the launch of USDH affect Circle? Circle’s USDC dominance on Hyperliquid could diminish, potentially impacting its revenue and CIRCL stock price.
• What are the regulatory challenges facing stablecoins? Stablecoin issuers face increasing regulatory scrutiny, including requirements for reserve backing and clarity.
• What is the GENIUS Act? The GENIUS Act outlines requirements for stablecoin issuers tracking the USD on major public chains.

What role do you foresee stablecoins playing in the future of decentralized finance? Share your thoughts in the comments below!

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How might USDHS reliance on a centralized entity like Stripe affect its long-term stability and appeal compared to more decentralized stablecoins?

The Emerging Stablecoin Landscape: USDH vs. USDC

The stablecoin market is bracing for potential disruption. For years, Circle’s USDC has held a dominant position alongside Tether’s USDT, but a new contender, USDH (Hyperliquid’s USDH), is entering the arena.This isn’t just a technical development; it has notable implications for companies like Circle (CIRCL stock) and the broader cryptocurrency ecosystem. The recent proposal, and subsequent community pushback, surrounding USDH’s reliance on Stripe highlights the complexities and potential vulnerabilities within the stablecoin space. Understanding these dynamics is crucial for investors and anyone involved in decentralized finance (DeFi).

What is USDH and Why the Controversy?

USDH, proposed by Hyperliquid, aims to be an over-collateralized stablecoin. Unlike some stablecoins backed by commercial paper, USDH intends to utilize a more transparent and potentially more secure model. Though,the initial plan to link USDH’s minting and burning mechanisms to Stripe has sparked considerable debate.

Here’s a breakdown of the key concerns, as reported by coindesk on September 8, 2025:

* Centralization Risks: Tying USDH so closely to Stripe introduces a single point of failure. If Stripe were to face regulatory issues or technical difficulties, USDH’s stability could be compromised.

* conflict of Interest: Stripe’s involvement raises questions about potential conflicts of interest, given its broader financial services offerings.

* Community Opposition: Paxos, Frax, and Agora are actively competing for the USDH contract, demonstrating a lack of consensus within the DeFi community regarding Stripe’s role. MoonPay’s backing of Agora CEO Nick van Eck’s coalition further complicates the situation.

* Transparency Concerns: While over-collateralization is generally seen as a positive, the specifics of the collateralization and the mechanics of the Stripe integration need further scrutiny.

Impact on Circle (CIRCL) and USDC Market Share

The emergence of a viable alternative to USDC, like USDH, directly threatens Circle’s market share and, consequently, its stock performance (CIRCL). Here’s how:

* Reduced Trading Volume: If traders and DeFi protocols shift towards USDH, USDC’s trading volume will likely decrease, impacting Circle’s revenue from transaction fees.

* Decreased AUM (Assets Under Management): A decline in USDC’s AUM could negatively affect Circle’s profitability and valuation.

* Increased Competition: The stablecoin market is becoming increasingly competitive. USDH adds another layer of competition, forcing Circle to innovate and potentially lower fees to retain users.

* investor Sentiment: Negative sentiment surrounding USDC’s dominance, fueled by concerns about centralization or regulatory risks, could lead to a sell-off of CIRCL stock.

CIRCL Stock Performance (as of Sept 11, 2025): Note: Actual stock performance data would be inserted here. Currently, analysts are closely monitoring the USDH development and its potential impact on Circle’s Q3 and Q4 earnings reports.

The Role of Over-Collateralization and DeFi Innovation

USDH’s proposed over-collateralization model is a key differentiator. Over-collateralization means that more value in crypto assets is locked up as collateral than the value of the USDH tokens issued. This is designed to provide a higher degree of stability and resilience against market fluctuations.

Here’s a comparison of collateralization approaches:

Feature	USDC	USDH (Proposed)
Collateral Type	US Treasury Bonds, Cash, corporate Bonds	Primarily Crypto Assets
Collateralization Ratio	Typically near 1:1	Significantly over 1:1 (exact ratio TBD)
Transparency	Moderate	Potentially Higher (depending on implementation)
Centralization	Moderate	Potentially Higher (due to Stripe link)

The DeFi community is increasingly favoring over-collateralized stablecoins as a way to reduce reliance on customary financial systems and enhance transparency. Projects like MakerDAO’s DAI have demonstrated the viability of this approach.

Alternative Stablecoins: A Growing Ecosystem

USDH isn’t the only stablecoin challenging USDC’s position. Several other projects are vying for market share:

* Tether (USDT): Remains the largest stablecoin by market capitalization, but faces ongoing scrutiny regarding its reserves.

* Dai (DAI): A decentralized, over-collateralized stablecoin governed by MakerDAO.

* Frax (FRAX): A fractional-algorithmic stablecoin that combines collateralization with algorithmic stability mechanisms.

* paxos (USDP): A regulated stablecoin backed by US dollars.

The proliferation of stablecoins provides users with more choices and potentially reduces systemic risk. However, it also increases the complexity of the market and the need for robust regulatory oversight.

Regulatory Landscape and Future Outlook

the regulatory landscape for stablecoins is evolving rapidly