Liquidity exits markets as ERC stablecoins decline by more than $7 billion in a single week

Ethereum-based stablecoins have experienced a decline in market capitalization for the first time during the current market cycle. According to data from DeFiLlama, the stablecoins have lost more than $7 billion in just a week.

The crypto market is facing significant headwinds amid the ongoing geopolitical landscape. The market capitalization of the Ethereum stablecoin market has plunged by nearly $7 billion in just one week, from $162 billion to $155 billion.

The massive decline marks the first time in this cycle that the Ethereum stablecoin market cap has declined in this magnitude.

Ethereum-based stablecoin market cap signals bearish sentiment

The decline in the ERC-20 stablecoin market cap is a negative sign that could indicate some investors are completely exiting the crypto market, taking liquidity with them. The data suggests that these investors may be converting their crypto assets into fiat currencies to explore other markets with better returns. 

Tether and Circle are the world’s largest stablecoin issuers. Data from DeFiLlama shows that USDT and USDC experienced the most significant market cap declines among the top 5 stablecoins. USDT’s stablecoin supply on the Ethereum blockchain is down 1.89% over the last 7 days and 4.96% over the last month, bringing its market cap to $83.702 billion. 

Circle’s USDT is down 5.47% over the last 7 days and 4.12% over the last 30 days. DeFiLlama shows that the stablecoin supply on Ethereum sits at approximately $46.781 billion. According to Tether’s transparency page, Ethereum has the most significant USDT supply in circulation, at around $97.9 billion.

Precious metals such as gold and silver have been on a strong rally for months. Gold is up nearly 20% year-to-date. On the other hand, the stock market has maintained a steady uptrend, signaling investor confidence. These markets could be responsible for the declining liquidity in the crypto market.

ERC-20 stablecoins record notable growth in 2025

The news comes after Cryptopolitan reported a notable growth in Ethereum-based stablecoins. A previous report highlighted that Tether had minted 1 billion USDT on the Tron blockchain on January 10. The report also noted that Tether and Circle had minted more than $3.75 billion that week. 

Another report brought Ethereum-based stablecoins into the spotlight after they reached a record turnover in the preceding 12 months. The report published on December 31 explained that Ethereum-based stablecoins had reached peak activity at the end of 2025.

According to the publication, the stablecoins recorded transactions from over 593,000 daily active wallets, with USDC logging a lower transaction count but transferring a larger financial value compared to other Ethereum-based stablecoins.

The report identified the prevalence of USDC transfers for high-value activities as a notable shift in 2025. USDC’s increased activity in 2025 showed that investors and institutions preferred fully regulated stablecoins, as the crypto asset can be used to power transactions without users facing any restrictions in the U.S. and Europe.

Despite the drop in market cap, analysts predict that the general stablecoin sector will grow significantly in the near future. Mercado Bitcoin, a Brazilian exchange, published a report highlighting that stablecoin’s potential growth could bring the market cap to $500 billion by the end of 2026. 

The exchange highlighted the crucial role stablecoins play in providing liquidity to the sector, which is the primary driver of market cap expansion. 

According to Coingecko, the stablecoin market capitalization across all chains currently sits at $313.337 billion, with a 24-hour trading volume of $110 billion. Tether still leads the pack with a market cap of $187 billion and a 24-hour trading volume of 95.7 billion. On the other hand, Circle trails in second place with a market cap of $72.4 billion and a 24-hour trading volume of $7 billion. 

The smartest crypto minds already read our newsletter. Want in? Join them.