Why did the cryptocurrency market evaporate 900 billion dollars while the market value of stablecoins reached an all-time high?

Author: shushu, BlockBeats

Since Trump took office, the total market value of cryptocurrencies has evaporated by nearly $900 billion, but the total market value of stablecoins has grown by 1.03% in the past week, surpassing $227 billion and reaching an all-time high. The community can't help but wonder what factors are driving the market value of stablecoins to rise against the trend?

As the market value of stablecoins breaks historical highs, Frax Finance co-founder Sam stated on Twitter that the bear market is a bull market for stablecoins. He said, "A different way to say that prices are falling is that the dollar is appreciating. In these environments, on-chain dollar issuers will gain the most, especially with favorable regulations on the horizon."

Not long ago, CryptoQuant CEO Ki Young Ju also analyzed that the previous altcoin season capital flow cycle is outdated. "The Bitcoin-dominated rotation of crypto assets has basically ended under the push of regulation and institutional adoption. New capital will flow through stablecoins or widely adopted altcoins—this is completely different from traditional altcoin seasons."

Against the backdrop of the turbulent decline of both crypto assets and U.S. stocks, stablecoins have risen against the trend, consolidating the dollar's hegemony, and may have become the biggest winner in the recent market turmoil.

Regulatory Easing

On February 27, U.S. crypto-friendly Senator Cynthia Lummis stated at the first hearing of the Senate Banking Committee's Digital Assets Subcommittee, "We are about to establish a bipartisan legislative framework for stablecoins and market structure."

Meanwhile, at a White House crypto summit last Friday evening, which had little news leak, Trump expressed hope to receive stablecoin legislation before Congress recesses in August to advance federal regulation reforms for cryptocurrencies, reiterating the desire for the dollar to "maintain its dominance in the long term."

U.S. Treasury Secretary Scott Bessent pledged to use digital assets to consolidate the dollar's status as the global reserve currency, stating, "We will think deeply about the stablecoin system. As President Trump has instructed, we will maintain the U.S. as the world's dominant reserve currency, and we will use stablecoins to achieve this."

This statement highlights the U.S. government's concerns about macroeconomic and geopolitical uncertainties, which could lead to a decline in foreign investor demand for U.S. Treasuries, thereby pushing up Treasury yields. Over the past year, the two largest holders of U.S. Treasuries, Japan and China, have continuously reduced their holdings. To maintain the dollar's status as the global reserve currency, it is essential to ensure sustained demand for U.S. Treasuries in the international market.

By holding U.S. Treasuries as reserve assets, stablecoins can help lower Treasury yields while simultaneously expanding the global circulation of the dollar. Stablecoins need to hold sufficient dollar reserves to meet investor redemption demands, and currently, Tether is one of the largest holders of three-month U.S. Treasuries.

The total market value of stablecoins has surged by $50 billion since Trump was elected; Source: DeFiLlama

On the policy front, the U.S. has proposed two stablecoin bills—the House's "Stablecoin Transparency and Accountability Act" (STABLE Act) and the Senate's "U.S. Stablecoin Innovation and Establishment Act" (GENIUS Act), aimed at regulating stablecoin issuers through licensing requirements, risk management rules, and 1:1 reserve backing.

These two bills propose different frameworks but agree on strict compliance measures. Both support private, dollar-backed stablecoins and prohibit central bank digital currencies (CBDCs).

The main differences include:

• Regulatory oversight (GENIUS allows states to regulate issuers until their market cap reaches $10 billion; STABLE allows opting out of federal regulation if state rules meet standards)
• Reserve requirements (STABLE allows the use of Treasuries, bank deposits, and central bank reserves, while GENIUS also includes money market funds and reverse repos)
• Consumer protection (GENIUS focuses on transparency and enforcement, while STABLE requires one-to-one reserves and prohibits algorithmic stablecoins)

Stricter regulations may challenge Tether's dominance, as both bills require monthly audits, asset segregation, and strict reporting, which could force exchanges to delist non-compliant stablecoins, similar to the impact of the EU's MiCA. These laws will also pave the way for the legalization of stablecoins, attracting institutional adoption while setting barriers for less transparent issuers. If passed, they will establish clear guidelines for stablecoin issuers, ensuring market stability and compliance.

This morning, FOX Business reporter Eleanor Terrett posted on social media, "As far as I know, an updated version of the stablecoin bill from U.S. Republican Senator Bill Hagerty—the GENIUS Act—will be released tonight (local time). As of this morning, the U.S. Senate Banking Committee still plans to amend the bill on Thursday."

The new document expands on the reciprocity provisions for overseas payment stablecoins, adding reserve requirements, regulation, anti-money laundering and anti-terrorism measures, sanctions compliance, liquidity requirements, and risk management standards, aimed at promoting international transactions and achieving interoperability with overseas dollar-denominated payment stablecoins.

The FOMO Wave for Stablecoins is Coming, What Opportunities Lie Ahead?

In the context of Trump clearly expressing the desire to clarify stablecoin-related legislation before August, efforts are being made for stablecoin adoption by Japan, Thailand, and U.S. government departments.

On March 10, the Thai Securities and Exchange Commission designated stablecoins USDT and USDC as compliant cryptocurrencies. This approval means that USDT and USDC can be traded legally in Thailand, paving the way for stablecoins to be listed on regulated trading platforms in Thailand and laying the foundation for the widespread use of USDT and USDC in the Thai payment sector.

On the same day, the Japanese Cabinet announced the approval of proposals to reform laws related to crypto brokerage and stablecoins. According to an announcement from the Financial Services Agency (FSA) of Japan, the government has approved a Cabinet resolution to amend the Payment Services Act. This bill will allow crypto companies to operate as "intermediary businesses." This means brokers will no longer need to apply for the same type of licenses as crypto trading platforms and wallet operators. The bill also provides more flexibility for stablecoin issuers regarding the types of assets that support their tokens.

According to the Financial Times, some of the world's largest banks and fintech companies are eager to launch their own stablecoins, aiming to capture market share in cross-border payments that they expect will be reshaped by cryptocurrencies.

Last month, Bank of America expressed its intention to issue its own stablecoin, joining established payment providers like Standard Bank, PayPal, Revolut, and Stripe, aiming to compete with businesses dominated by crypto groups like Tether and Circle.

This change comes six years after regulators strongly opposed Meta's Libra stablecoin, further propelled by U.S. President Trump's active support for cryptocurrencies. "It's like selling shovels during the stablecoin boom," said Simon Taylor, co-founder of fintech consultancy 11:FS, comparing it to FOMO.

In addition to Bank of America, other major players in traditional finance (TradFi) are also preparing for the development of stablecoins.

• Standard Chartered: Advancing a Hong Kong dollar stablecoin project
• PayPal: Plans to expand the issuance of PYUSD by 2025
• Stripe: Acquired Bridge stablecoin platform for $1.1 billion
• Revolut: Exploring the possibility of issuing stablecoins
• Visa: Using stablecoins for payments and global business

Previously, the increase in stablecoin supply often drove cryptocurrency prices up, as these tokens were primarily used as short-term holding tools during trading gaps. Now, the application of stablecoins is breaking out of the speculative realm—SpaceX uses stablecoins for sales receipts through Starlink in Argentina and Nigeria; ScaleAI uses them to pay overseas contractors.

The most direct trading opportunity lies in betting on which public chains mainstream institutions will choose to issue new stablecoins. Currently, Ethereum, Base, Tron, and Solana are the main candidates. On February 26, Jesse Pollak, head of the Base protocol, stated that they plan to launch stablecoins for all global currencies on Base this year.

It is evident that both the on-chain world and traditional finance are making plans around U.S. and dollar stablecoins. As for the altcoin season, perhaps, as CryptoQuant's CEO said, the past capital flow cycle of altcoin seasons is indeed outdated.