USDC's launch on Hyperliquid by Circle poses a potential threat to Arbitrum, as per Messari's report.
In a significant development for the decentralised finance (DeFi) landscape, stablecoin giant Circle is planning to roll out native USDC on Hyperliquid's HyperEVM blockchain. This move is expected to boost Arbitrum's market share in DeFi, increase the utility and adoption of USDC, and potentially increase Arbitrum's token value through enhanced liquidity and trading activity.
Hyperliquid, which currently commands an 83% share of decentralised perpetual derivatives trading on Arbitrum, processing $150 billion in monthly volume, is set to benefit significantly from this deployment. The direct minting and redemption of USDC on Hyperliquid’s HyperEVM will improve transaction safety and speed, critical for billions in derivatives settlements.
The move could also reduce the need to use wrapped tokens routed through Circle's current Arbitrum bridge, thereby streamlining the process and reducing operational risk. This is particularly significant given the community debate surrounding the bridge's structure.
The potential removal of bridging requirements for USDC on Hyperliquid could result in a significant portion of liquidity exiting Arbitrum. This could potentially weaken Arbitrum's strategic position, as reflected by a 11% fall in its token since the July 31st announcement. However, the long-term implications are more complex.
By removing efficiency barriers, Circle's native USDC deployment is likely to increase institutional participation in Arbitrum's DeFi ecosystem. This could enhance demand for Arbitrum's native token if used for fees or governance, potentially increasing its value.
Moreover, the move could position Hyperliquid to compete more effectively with major L1s and L2s, as it reduces the reliance on external bridges. The removal of the need to store bridged USDC is also noted by blockchain analysts as a significant step in addressing one of the biggest FUD points for Hyperliquid.
Dylan Bane, senior research analyst at Messari, views Circle minting USDC directly on Hyperliquid as a sign of confidence in Hyperliquid's credibility and growth potential. Institutional investment in Hyperliquid's token could increase due to Circle's institutional credibility in both crypto and TradFi.
As Hyperliquid's dependency on Arbitrum is expected to decline as HyperEVM continues to mature, Arbitrum's position as a leading DeFi platform could consolidate with greater liquidity, smoother user experience, and increased institutional confidence. This, in turn, could result in upward pressure on its native token’s value, assuming prevailing market conditions support such growth.
[1] Consensys - Hyperliquid: A HyperEVM-based Perpetual Protocol for Arbitrum [2] Arbitrum - Arbitrum One: The Most Scalable EVM-compatible Layer 2 Solution [3] Messari - Hyperliquid: The Next Generation Perpetual Protocol on Arbitrum
- The deployment of Circle's native USDC on Hyperliquid's HyperEVM blockchain, expected to improve transaction safety and speed, could attract more institutional participation in the Arbitrum DeFi industry, as they might find the process more streamlined and less operationally risky.
- As Hyperliquid moves towards reducing its reliance on external bridges with Circle directly minting USDC on its platform, it could position itself to compete more effectively in the finance technology sector, potentially gaining institutional investment and increasing its credibility in both crypto and TradFi markets.
