Written by: Xiaobing, Deep Tide TechFlow

On May 14, Coinbase and Circle jointly announced that they would re-enter Hyperliquid under the "AQAv2" framework, with Coinbase becoming the treasury deployer for USDC and returning most of the income generated from USDC reserves back to the Hyperliquid protocol. Native Markets' USDH agreed to sell its brand assets to Coinbase and gradually exit.

Sounds like an ordinary partnership announcement? Not quite.

The specific numbers are as follows: The USDC volume on Hyperliquid is about $5 billion, and based on the current treasury yield, it can generate around $200 million in reserve income annually. According to the details of the partnership, about 90% of the reserve income will flow back to the Hyperliquid ecosystem after "costs" are deducted, which is expected to boost protocol revenue by 22%–26%.

This is the largest concession ever made by an issuer to a single channel player in the stablecoin industry. Before this, only Coinbase (as a joint issuer, taking more than half of Circle's distribution income), Binance, and a few undisclosed partners were able to receive profit sharing from Circle.

Hyperliquid, on the other hand, is a decentralized protocol with no equity relationship, no joint issuance history, and even a vague legal entity.

How does it hold such power?

Pressure Tactics

To understand this transaction, we need to go back to September 2025.

At that time, Hyperliquid was still using bridged USDC as its main margin asset, with USDC volume nearing $6 billion, accounting for 7.5% of the total USDC circulation. At that interest rate level, these $6 billion contributed around $220 million in reserve income to Circle each year, while Hyperliquid received not a penny.

A KOL commented: "Hyperliquid holds $5.5 billion in USDC, generating $220 million in revenue for Circle each year. After USDH launches, it can retain $110 million within the protocol. It doesn’t require new products or new users; it simply redistributes reserve income from Circle shareholders back to HYPE holders."

So the Hyperliquid team did something incredibly smart: they didn’t issue their own stablecoin but instead put the ticker "USDH" out for open bidding. Paxos, Ethena, Frax, Sky, Agora, Native Markets—half of the stablecoin circle rushed in to bid. The bidding conditions all revolved around "how much reserve income can you return to the Hyperliquid ecosystem," with almost all bidders offering a profit-sharing ratio of 95%–100%.

In the end, the community awarded the ticker to Native Markets, a team founded by former Uniswap Labs COO Mary-Catherine Lader, tailored specifically for Hyperliquid, which set the allocation at 50% for HYPE repurchases and 50% for ecosystem incentives.

The true power of this move lies not in whether USDH can replace USDC; in fact, USDH has launched for 8 months and its scale is still far less than that of USDC. The significance is that it put a knife to Circle and Coinbase:

Either you accept this set of "protocol sovereignty" rules and give up the earnings; or we will gradually replace you.

Coinbase's reaction is intriguing. Instead of standing firm with Circle, it directly took over the brand assets of USDH, then "copied" the entire AQA framework into the USDC system. On the surface, it seems Coinbase is safeguarding USDC's home advantage. In essence, Coinbase acknowledged: the rules of the game have changed, concessions must be made.

Mary-Catherine Lader, co-founder of Native Markets, tweeted on the same day Coinbase announced: "When we acquired USDH 8 months ago, our argument was simple; people care about stablecoins that can deliver value to the network and users. Today, that argument has been validated."

She is being too polite; this is a meticulously designed, textbook-level transfer of power in the industrial chain.

What Does This Rewrite?

First Layer: The "Channel Profit Sharing Era" of USDC Reserve Income is Officially Launched

For the past decade, the commercial model of stablecoin issuers has been simple and brutal: users mint stablecoins → issuers buy US dollars with treasury bonds → all earnings go to the issuer. Circle made $2.6 billion in reserve income this way in 2025, supporting a $30 billion IPO valuation.

This model is based on an assumption: issuers are scarce while channels are abundant. USDT and USDC, as the two most liquid stablecoins, have exchanges (CEX and DEX) begging to list them.

Hyperliquid demonstrated that when a channel becomes large enough (accounting for 7.5% of USDC circulation), and it has the ability to issue its own stablecoin to replace you at any time, the power dynamic flips, and the issuer becomes a party competing for scarce resources.

What will happen next? Just look at Circle's recently submitted Q1 financial report: $2.637 billion in reserve income is an absolute pillar of revenue. If in the future Binance, OKX, Bybit, Phantom on Solana, or even Ethereum L2 giants use this "AQA script" for negotiations, Circle’s profit margins will be sliced thinner and thinner.

CRCL’s stock price has already preemptively reacted to this anxiety. On May 14, it briefly surged to $132.44 during trading, but closed at $122.34, a 7.6% retracement from the day's high. The market cast its vote with real money: in the short term, the news is favorable (USDC expands on Hyperliquid's home ground), but in the long term, it is bearish (the profit-sharing model has been institutionalized).

Second Layer: HYPE Has Gained a True "Cash Flow Anchor"

Many people fail to realize that this transaction represents a structural upgrade in the valuation logic for HYPE.

Previously, the value story for HYPE was: trading fees → aid fund → buyback and burn. This model relied on trading volume, which is cyclical and volatile.

Now there is an additional leg: treasury yield → protocol income → buyback HYPE. This leg does not depend on market sentiment or trading activity; it only depends on how many dollars are locked on Hyperliquid.

This is a very different cash flow. Its nature is closer to the net interest income of a bank rather than the fee income of an exchange. The latter fluctuates significantly with market conditions, while the former remains stable as long as interest rates don't go to zero and locked volume doesn't go to zero.

Based on the current scale, a simple calculation yields: $5 billion × ~4% treasury yield × 90% profit-sharing ≈ $180 million/year in new protocol income. This money is entirely used for HYPE buybacks and the aid fund, meaning an annual additional "passive deflation" of over 1% for a token with a circulating market cap of about $15 billion, and this pool is also growing at a year-on-year doubling rate.

On the day of the news, HYPE rose 14%, and the market's reaction was appropriate. But what is even more noteworthy is not the increase on that day, but the transition of the HYPE valuation model from "exchange token" to "sovereign stablecoin treasury income distribution certificate."

The latter is a completely different asset category that the market has not yet priced.

Third Layer: The "Neutrality" of USDC Begins to Collapse

This is the layer that is most easily overlooked, but potentially the most far-reaching.

The reason stablecoins can serve as the settlement layer of the crypto world is because of their neutrality, with USDC theoretically treating all chains, exchanges, and applications equally. This is what sets it apart from banks: banks have client stratification, while stablecoins do not.

However, the AQAv2 protocol provides Hyperliquid with treatment that is different from how USDC is treated on the Ethereum mainnet, on Solana, or on Arbitrum. Hyperliquid receives a 90% profit-sharing from reserves, and Circle and Coinbase are required to stake HYPE as validators—this is a highly customized, deeply bound relationship.

So, the question arises: When USDC offers different economic terms to different networks, can it still be considered a "neutral" settlement layer?

Every channel with bargaining power will start demanding its own "special terms." Don’t Solana want it? Don’t Base want it? Don’t Arbitrum want it? USDC will ultimately become a highly fragmented “profit-sharing network” stitched together by dozens of bilateral agreements.

This is the true legacy left by USDH; it didn’t lose to USDC, it forced USDC to become USDH.

That remark from the co-founder of Native Markets holds the key: "USDH may be disappearing, but its core innovation already won because Coinbase is adopting the underlying economics."

Deep Tide Perspective

From a trader's perspective, the most interesting aspect of this event is not that HYPE rose 14% or that CRCL fell 7%. The most interesting part is: Throughout financial history, every instance of "channel reverse pricing upstream" has ended up looking quite similar.

Visa and Mastercard can continually capture the thickest slice of profits in card organizations because they are the channels; commercial banks are ultimately willing to share profits with Walmart and Costco to create co-branded credit cards because without the terminals, there are no transactions; Apple’s 30% commission from the App Store is fundamentally a tax collected by the channel from developers.

But the other side of the story is: when a channel grows to a certain critical point, it will start to eat into upstream profits. Costco’s private brand Kirkland made it to the forefront of consumer minds, Spotify forced record companies to accept subscription models, and Steam pressured publishers to accept a 30% cut while also relinquishing refund rights.

The stablecoin sector in the crypto world has previously been stuck at the "upstream dictating terms" stage. What Hyperliquid has done forcefully pushes the industry into the next stage where "the channel dictates terms."

In the short term, this is just a transaction. In the medium term, this is the beginning of the structural slicing of the Circle business model. In the long term, this represents a turning point for stablecoins from "issuer sovereignty" to "network sovereignty," where stablecoins no longer belong solely to the companies that issue them but start to belong to the networks that hold them.

Those who think this is just Hyperliquid winning a game haven’t seen that the real card table has been flipped over.

Who will be the next to take action? I bet on Solana; it won’t be long.