Stablecoin issuers are continuously creating more new tokens, notably USDT and USDC. This expansion is often compared to the wick that ignites large rallies across the entire market. Yet, data shows that while the market capitalizations of major stablecoins have increased for months, the entire crypto market has not grown proportionally.
The following report presents several reasons for this gap, based on recent data and analyses from the sector.
3 reasons for the divide between stablecoins and the rest of the 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 thus experienced steady growth since the beginning of the year, and Circle as well as Tether have issued new tokens at a sustained pace. The latest report from Lookonchain, an on-chain tracker, noted that Tether issued 1 billion dollars while Circle added an additional 500 million dollars.
Analysts often describe this capital as 'dry powder' for the market. Yet, the question remains: where has it actually gone?
Where are the stablecoins going?
CryptoQuant data indicates that USDT (ERC-20) on derivatives exchanges has steadily increased since early 2025, rising from under 40 billion dollars to nearly 60 billion.
In parallel, USDT (ERC-20) present on spot exchanges is declining. It is currently near its lowest levels of the year.
USDC on spot exchanges has also seen a sharp decline in recent months, dropping from 6 billion dollars to 3 billion dollars.
These data reflect a change in behavior among traders. Indeed, many now prefer short-term leveraged opportunities rather than long-term accumulation in spot. This change poses a barrier to bullish momentum for altcoin prices.
Leverage trading also contributes to increasing risk, as it allows for quick profits but can just as quickly wipe out capital. Several liquidation events worth several billion dollars in 2025 illustrate this ongoing trend.
Stablecoins now surpass crypto investment
Another reason lies in the broader utility of stablecoins. Indeed, issuance by Tether and Circle does not solely reflect internal demand for cryptocurrencies but also demand from the international financial system.
A new report from the IMF particularly highlights the widespread use of stablecoins like USDT for cross-border remittances.
The chart shows that cross-border flows involving USDT and USDC have reached approximately 170 billion dollars in 2025.
"Stablecoins could enable faster and cheaper payments, particularly internationally and for remittances, where traditional systems are often slow and costly," said the IMF.
As a result, even if supply increases, a substantial portion of capital is absorbed into concrete applications rather than mere speculation.
Investor caution slows down capital rotation
A third factor lies in investors' cautious sentiment.
Indeed, in a recent report, Matrixport describes current market conditions as lacking participation from retail investors, in addition to displaying low trading volume. Sentiment indicators thus remain in 'fear' and 'extreme fear' zones.
"In summary, without volume, enthusiasm cannot develop, and without enthusiasm, volume will not return, a classic crypto dilemma, the chicken and egg story," reported Matrixport.
This sentiment drives investors to hold stablecoins instead of investing them in Bitcoin or altcoins.
Historical data further supports this perspective. 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 bearish phase. By the end of 2022, the supply of stablecoins plummeted as many investors left the market.
Thus, an increase in the market capitalizations of stablecoins does not automatically translate into a rise in the price of Bitcoin or altcoins. The impact heavily depends on investor sentiment, capital flows, and broader use cases that drive demand for stablecoins.
The moral of the story: Stablecoin or altcoins, one must choose.
