Stablecoin factors continue to issue new tokens, such as USDT and USDC. This expansion is often compared to a spark that ignites significant market rallies. However, data shows that the market values of leading stablecoins have been increasing for months, while the broader crypto market has not grown at the same rate.
The next report outlines several reasons for this disparity, based on recent data and industry analyses.
3 reasons why the growth of stablecoins is decoupling from the crypto market
CoinGecko data 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 experienced steady growth since the beginning of the year. By December, Circle and Tether continued aggressive issuance. The latest report from the on-chain tracking system Lookonchain noted that Tether issued one billion dollars and Circle added another 500 million dollars.
Analysts often describe this capital as "dry powder" for the markets. The question, however, is: where has it actually gone?
More stablecoins are flowing into derivatives exchanges than spot markets.
CryptoQuant data indicates that USDT (ERC-20) in derivatives exchanges has steadily increased since the start of 2025, rising from under 40 billion to nearly 60 billion.
At the same time, the USDT (ERC-20) spot market has been on a downward trend. It is currently close to annual lows.
Also, USDC in the spot market has sharply collapsed in recent months, dropping from 6 billion to 3 billion.
This data reflects a change in trader behavior. Many prefer short-term leveraged opportunities rather than long-term spot accumulation. This shift makes it harder for altcoin prices to rise.
Leveraged trading also brings greater risk. It can yield quick profits but can just as quickly wipe out capital. Several billion-dollar liquidation events in 2025 illustrate this ongoing trend.
Stablecoins now serve many purposes beyond cryptocurrency investing.
Another reason is the broader utility of stablecoins. The issuance of Tether and Circle reflects not only domestic demand for cryptocurrencies. It also reflects the demand from the global financial system.
A new IMF report highlights the widespread use of stablecoins, such as USDT, in cross-border remittances.
The figure shows that cross-border flows of USDT and USDC rose to about 170 billion dollars by 2025.
"With stablecoins, payments can be faster and cheaper, especially across countries and in remittances, where traditional systems are often slow and costly," the IMF stated.
As a result, even though supply is increasing, a significant portion of capital is absorbed into real-world applications instead of speculation.
Investor caution slows down capital circulation.
The third factor is cautious investor sentiment.
A recent Matrixport report describes the current market conditions as a lack of participation from retail investors and low trading volume. Sentiment indicators remain in the "fear" and "extreme fear" territory.
"Simply put, without volume, enthusiasm cannot grow, and without enthusiasm, volume does not return, a classic cryptocurrency chicken-and-egg situation," Matrixport reported.
This sentiment leads investors to hold stablecoins instead of investing them in Bitcoin or altcoins.
Historical data supports this view. Comparing the price of Bitcoin and the market capitalizations of USDT and USDC shows that in the first half of 2022, stablecoin supply continued to grow, even as the markets shifted into a bear market. By the end of 2022, stablecoin supply sharply declined as many investors exited the market.
The growth of stablecoin market capitalization does not automatically mean higher Bitcoin or altcoin prices. The impact heavily depends on investor sentiment, capital flows, and broader use cases driving stablecoin demand.
