Woofun AI reports that the structural dominance of USDC is failing to protect Circle from aggressive profit extraction by distribution channels, a trend highlighted by analyst Alex Xu. As the stablecoin supply diversifies, the bargaining leverage of intermediaries—including exchanges, merchant networks, wallets, issuers, and AI terminals—is accelerating upward, directly contradicting earlier assumptions that USDC’s market share would insulate Circle from such pressure. This dynamic suggests that channel entities are increasingly positioned to consume the majority of stablecoin project profits, regardless of brand loyalty or compliance status.

The mechanics of this profit erosion are clearly illustrated by the upcoming renewal between Circle and Coinbase. According to Coinbase CEO Brian Armstrong, the two firms will extend their revenue-sharing cooperation agreement next month under the original terms, a decision that locks Circle into sharing half of its profits with the exchange. Crucially, this calculation excludes revenue generated through Circle’s own direct channels, while profits derived from USDC usage on the Coinbase platform remain entirely with Coinbase. This arrangement underscores the asymmetry in power, where the issuer must concede significant margins to maintain access to the exchange’s user base.

Prior to this confirmation, market optimists had speculated that Circle’s dominant position in the compliant stablecoin market would provide sufficient leverage to renegotiate more favorable terms. These analysts believed Circle could secure a lower revenue-sharing ratio, thereby improving its bottom line.

However, the adherence to the original contract terms shatters this optimism, revealing that market share alone does not translate into negotiation power when the distribution channel holds the keys to user liquidity and transaction volume.

Further evidence of this shifting balance is found in the Hyperliquid case study, which demonstrates an even more extreme extraction model. Under a new agreement with Coinbase, Hyperliquid will capture 90% of the reserve profits generated from the platform’s existing USDC holdings. This figure represents a near-total appropriation of yield by the channel, leaving the issuer with a negligible fraction of the economic value created by its own asset. Such terms indicate that specialized trading venues can dictate harsh conditions without fear of losing the stablecoin supply.

Woofun AI data shows that the dynamics are similarly evident in the rise of the L2 Robinhood chain, which has adopted USDG, issued by Paxo, as its native stablecoin instead of USDC. Despite this substitution, there has been almost no impact on user growth or on-chain activity, suggesting that users are indifferent to the specific stablecoin brand as long as functionality is maintained.

Notably, USDG requires returning 97% of channel revenue to the Robinhood chain, a structure that prioritizes ecosystem incentives over issuer profitability. This model highlights how new chains can bypass established issuers by offering superior economic terms to their own infrastructure.

These precedents set a challenging tone for Circle’s future negotiations with traditional crypto channels like Binance and Kraken. The emergence of competitive solutions such as OUSD further complicates Circle’s position, as these alternatives offer viable substitutes that reduce dependency on USDC. It is easy to envision that Circle will face even more stringent demands from these major exchanges, rather than leniency. The logic is straightforward: if Hyperliquid can secure such favorable terms, why should Binance or Kraken accept less? The perception of Circle as a negotiable partner rather than an indispensable one is solidifying.

The pressure extends beyond crypto-native venues into traditional payment competition, where Stripe, Visa, and MasterCard control critical merchant and banking networks. These entities possess deep expertise in dispute resolution and compliance infrastructure, making them formidable competitors rather than mere distribution partners. They are not just squeezing USDC profits; they are entering the market directly with their own stablecoin, OUSD. Even Circle’s main partner, Coinbase, supports this project, acting as a 'vampire' that drains potential value from the USDC ecosystem. This multi-front competition threatens to isolate Circle in its own stronghold.

In the emerging field of Agent payments and settlement, the situation is even more precarious. It remains uncertain whether stablecoins can secure a meaningful share of payment volume, as traditional payment infrastructure and point systems based on commercial contracts appear fully capable of handling Agent calls. For marginal scenarios involving small high-frequency payments, the scale is too limited to justify the complexity of stablecoin integration. In these contexts, merchants, agents, and consumers exhibit profound indifference to the specific stablecoin used, viewing USDC, USD1, OUSD, and OUSG as functionally identical compliant assets.

This consumer and merchant apathy significantly lowers Circle’s bargaining power against channels in traditional and agent payment fields compared to the crypto sector. For investors evaluating Circle, these structural vulnerabilities are critical factors that predate recent market declines. As noted in the March 21 article 'From Tencent and Circle: Simple and Difficult Questions in Investment,' these issues were present when optimistic investors were still cheering for Circle’s return to 130. Subsequent events, including the launch of OUSD, the 90% revenue share with Hyperliquid, and failed negotiations with Coinbase, merely confirm these earlier deductions, marking a persistent risk to the company’s long-term valuation.