Stablecoin market capitalisation drops $10 billion in two months

The combined market capitalisation of the largest stablecoins is shrinking sharply. Within two months, $10 billion disappears from the stablecoin ecosystem, causing the total supply to fall back to around $263 billion. On-chain data from Glassnode shows that this decline is largely caused by large capital withdrawals at the two dominant players in the market.

USDC and USDT lose billions in supply

The figures are strikingly concrete. The supply of USDC, issued by Circle, falls by $6.6 billion: from $79.6 billion to $73.0 billion. Tether sees the USDT supply shrink by $5.7 billion, from $189.8 billion to $184.1 billion. Together, these are the two largest providers of stablecoin liquidity on the market, and their combined contraction explains nearly the entire decline in total stablecoin market capitalisation.

Notably, it was previously reported that Revolut is scrapping USDT, indicating that pressure on large stablecoins is coming from multiple sides. The current outflow suggests that investors are actively moving capital back into fiat or waiting on the sidelines.

Historical signal of a macro retracement phase

A contraction in stablecoin supply is historically seen as an indication of a broader macro retracement phase in the crypto market. When active capital is massively exchanged for fiat, or simply parked outside the market, it points to caution among investors. It is a pattern that is more often visible during broader market corrections.

Moreover, the chart from @alicharts shows that the peak of the stablecoin market capitalisation was around mid-May, just above $273 billion. Since then, a consistent downward trend has set in that continues through early July. Whether this is a temporary move or the start of a longer consolidation phase will have to become clear in the coming weeks.