I am noticing a rather concerning signal: the market capitalization of stablecoins is contracting.
This is the first time in the current cycle that we have witnessed such a sharp decline in the ERC-20 stablecoin group.
📉 In just one week, their total market capitalization has evaporated by about 7 billion USD, from 162 billion to 155 billion USD.
From my perspective, this is a negative signal. It shows that a portion of investors are no longer just sitting on the sidelines with stablecoins, but are choosing to withdraw entirely from the crypto market. In this context, the cryptocurrency market is still adjusting, while gold continues to reach peaks and the stock market maintains a relatively strong upward trend.
💡 This somewhat explains why liquidity is leaving crypto to seek yields in other markets.
Mechanically speaking, when the market capitalization of stablecoins decreases, it means that the demand to hold them is weakening. Simply put, investors are exchanging stablecoins back to fiat currency to allocate to other channels, while stablecoin protocols are forced to burn excess supply that is no longer needed.
Therefore, the decline in the market capitalization of ERC-20 stablecoins, in my opinion, is a bearish signal for the entire market.
Notably, this trend is not only observed on Ethereum but is also recorded on other blockchains.
Looking back at 2021, a similar development had once played a role in confirming the entry of $BTC into the bear market — even though at that time, the Terra-Luna shock also contributed to amplifying the effect.
👉 In my view, the key point is that this situation needs to reverse soon, so that it remains merely a cyclical fluctuation rather than becoming a structural issue. Otherwise, it will continue to weaken the already fragile liquidity environment of the current crypto market.
#BTC #altcoins
