Stablecoin issuers continue to issue new tokens, such as USDT and USDC. This expansion is often compared to the spark igniting large market increases. However, data shows that the market capitalizations of leading stablecoins have been increasing for months, while the broader cryptocurrency market has not grown proportionally.
The following article presents several reasons for this imbalance, based on recent data and industry analyses.
3 reasons behind the separation of stablecoin growth and the cryptocurrency market
Data from CoinGecko show that the market capitalizations of USDT and USDC reached new highs in December, at 185 billion USD and 78 billion USD, respectively.
Furthermore, both stablecoins have seen steady growth since the beginning of the year. By December, Circle and Tether continued aggressive issuances. The latest report from Lookonchain noted that Tether issued 1 billion USD and Circle added another 500 million USD.
Analysts often describe this capital as “dry powder” that enters the cryptocurrency market, ready to be deployed. However, the question remains, where has it actually gone?
More stablecoins are flowing into derivative exchanges than into spot exchanges.
Meanwhile, according to data from CryptoQuant, the amount of USDT (ERC-20) on derivative exchanges has consistently increased since the beginning of 2025. The report indicates that this amount rose from below 40 billion USD to nearly 60 billion USD.
In the meantime, USDT (ERC-20) on spot exchanges is experiencing a downward trend. It is currently close to its lowest annual levels.
USDC on spot exchanges has also sharply declined in recent months, from 6 billion USD to 3 billion USD.
It turns out that this data reflects a change in trader behavior in the cryptocurrency market. Many prefer short-term leveraged opportunities instead of long-term spot accumulation. This change makes it difficult for altcoins to gain upward momentum.
However, trading with leverage also comes with higher risks. It provides quick gains but can just as quickly erase capital. Many billion-dollar liquidations in 2025 illustrate this simple pattern, which is a nightmare for any trader who has lost capital.
Are stablecoins now serving other purposes beyond use in the cryptocurrency market?
Another reason stems from the broader utility of stablecoins. Issuance by Tether and Circle does not solely reflect internal demand for cryptocurrencies. It also reflects demand from the global financial ecosystem.
The new IMF report highlights the widespread use of stablecoins such as USDT in international remittances.
The chart shows that international flows involving USDT and USDC reached around 170 billion USD in 2025. The International Monetary Fund stated in a blog:
“Stablecoins can enable faster and cheaper payments, especially cross-border and for remittances, where traditional systems are often slow and costly.”
As a result, despite the increase in supply, a significant portion of capital is being absorbed into real-world applications instead of being used in the cryptocurrency market.
Investor caution slows capital rotation
The third factor is the cautious attitude of investors. As a result, the latest Matrixport report describes the current market conditions as lacking retail participation and showing low volume. Sentiment indicators remain in the “fear” and “extreme fear” zone. Matrixport noted:
“Simply put, without volume, enthusiasm cannot build up, and without enthusiasm, volume will not return, a classic return-to-start pattern in crypto.”
This attitude encourages investors to hold stablecoins instead of investing them in Bitcoin or altcoins.
Historical data reinforces this view. A comparison of 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 cryptocurrency market entered a bear phase. By the end of 2022, the supply of stablecoins plummeted as many investors left the cryptocurrency market.
Therefore, it can be confidently stated that the growth of the market capitalization of stablecoins does not automatically mean higher prices for Bitcoin or altcoins. The impact largely depends on investor sentiment, capital flows, and broader uses driving demand for stablecoins.
To check the latest cryptocurrency market analysis from BeInCrypto, click here.
