Stablecoin issuers continue to mint new tokens like USDT and USDC. This expansion is often compared to the spark that ignites major market rallies. However, data shows that the market capitalizations of major stablecoins have increased for months while the crypto market as a whole has not grown proportionally.
The following report highlights several reasons behind this discrepancy, based on recent data and industry analysis.
3 reasons behind the decoupling between the growth of stablecoins and the crypto market
Data from CoinGecko shows that the market capitalizations of USDT and USDC reached new highs in December, at 185 billion dollars and 78 billion dollars, respectively.
Both stablecoins have shown steady growth since the beginning of the year. By December, Circle and Tether continued to issue aggressively. The latest report from the on-chain tracker Lookonchain noted that Tether minted 1 billion dollars and Circle added another 500 million dollars.
Analysts often describe this capital as 'dry powder' for the market. However, the question remains: where has it actually gone?
More stablecoins flow into derivatives exchanges than into spot exchanges.
Data from CryptoQuant indicates that USDT (ERC-20) on derivatives exchanges has steadily increased since the beginning of 2025, rising from less than 40 billion dollars to almost 60 billion dollars.
Meanwhile, USDT (ERC-20) on spot exchanges is moving downwards. It is currently close to annual lows.
USDC on spot exchanges has also seen a decline, dropping from 6 billion dollars to 3 billion dollars in recent months.
This data reflects a change in trader behavior. Many prefer short-term leveraged opportunities rather than accumulating long-term in the spot market. This change makes it harder for altcoin prices to gain bullish momentum.
Leveraged trading also introduces greater risk. It allows for quick profits but can wipe out capital just as quickly. Several billion-dollar liquidation events in 2025 illustrate this ongoing trend.
Stablecoins now serve many purposes beyond investing in crypto.
Another reason stems from the broader utility of stablecoins. The issuance by Tether and Circle reflects not only the internal demand for cryptocurrencies. It also reflects demand from the global financial ecosystem.
A new report from the IMF highlights the widespread use of stablecoins like USDT for cross-border remittances.
The chart shows that cross-border flows involving USDT and USDC reached about 170 billion dollars in 2025.
"Stablecoins could enable faster and cheaper payments, particularly at a cross-border level and for remittances, where traditional systems are often slow and costly," noted the IMF.
As a result, even if supply increases, a substantial portion of capital is absorbed into real-world applications rather than speculation.
Investor caution slows down capital rotation.
A third factor is the cautious sentiment of investors.
A recent report by Matrixport describes the current market conditions as a lack of retail participation and low trading volumes. Sentiment indicators remain in the area of 'fear' and 'extreme fear.'
"Simply put, without volume, enthusiasm cannot grow, and without enthusiasm, volume will not return, a classic stalemate in the crypto sector," Matrixport reported.
This sentiment drives investors to hold stablecoins rather than invest them in Bitcoin or altcoins.
Historical data supports this view. A comparison between the price of Bitcoin and the market capitalizations of USDT and USDC reveals that, in the first half of 2022, the supply of stablecoins continued to grow even after the market entered a bear phase. By the end of 2022, the supply of stablecoins sharply declined as many investors exited the market.
An increase in market capitalizations of stablecoins does not automatically translate into higher prices for Bitcoin or altcoins. The impact heavily depends on investor sentiment, capital flows, and broader use cases driving demand for stablecoins.
