Why can't stablecoins, which have repeatedly reached new highs in market value, stop the bleeding for BTC?

Original Title: Why is the market cap of stablecoins hitting new highs while BTC continues to fall?

Original Author: Blockchain Knight

According to data from DefiLlama, the market cap of stablecoins reached a historic high last week, exceeding $234.6 billion, nearly doubling from the low of $124 billion in August 2023. Currently, USDT still leads the stablecoin market, with a market share of over 62%.

Meanwhile, the total market cap of Crypto has experienced a similar trend to that of stablecoins over the past two years, doubling from about $2 trillion in mid-2023 to around $4 trillion. However, the peak occurred in December last year, and it has since fallen back to around $2.8 trillion, a decline of about 30%, diverging from the growth in stablecoin market cap.

This raises an interesting question: Why is the market cap of stablecoins continuously growing while the total market cap of the Crypto market keeps declining?

From the chart showing the changes in total market cap of stablecoins and BTC, it can be seen that before December last year, the trends of the two were almost identical. The rise of BTC often accompanied an increase in stablecoin market cap, while the decline of BTC would also affect the market cap of stablecoins, albeit with different amplitudes.

Statistics show that during the bull market from 2020 to 2021, the issuance of USDT was strongly positively correlated with BTC prices, with a correlation coefficient exceeding 0.85, confirming this trend.

The current trend seems to align with the early 2022 movements of stablecoins and BTC, where there was also a period of expanding stablecoin market cap while BTC was retreating. However, I believe that the changes in stablecoins this time may differ from that instance.

Firstly, regarding the separation of stablecoin and BTC price changes, the new funds in this cycle have not directly flowed into the BTC spot market on a large scale. Data shows that the open interest in derivatives as of March 2025 remains at a high of $54 billion, while the net inflow of stablecoins into exchanges is relatively weak. This indicates that a large amount of stablecoins is being used for leveraged trading (such as futures and perpetual contracts), rather than actual holding demand, and even more is becoming a hedging tool.

Secondly, compared to a few years ago when the use of stablecoins was mainly concentrated in the single Crypto market, stablecoins have now expanded beyond the Crypto industry itself, beginning to "move from virtual to real."

According to a survey by Visa, in emerging markets, about 47% of users use stablecoins for dollar savings, 43% for better currency exchange, and nearly 40% use stablecoins for actual payments (goods, cross-border remittances, or salary payments). In countries like Turkey and Egypt, where inflation rates exceed 50%, the number of stablecoin holders has increased by 400% year-on-year, becoming a core choice for residents to preserve their assets.

Electronic payment giants like PayPal have integrated their stablecoin PYUSD with over 1 million merchants, including eBay and Shopify, with transaction volumes exceeding $1.2 billion in the first quarter of 2025. According to BlackRock's predictions, the stablecoin market size is expected to reach $2.8 trillion by 2028, penetrating 5% of global cross-border payments and 15% of the gig economy.

Therefore, the current expansion of the stablecoin market is not only limited to the growth of market cap in the Crypto market but also due to the expansion of its application scale itself, leading to a weakening correlation numerically. So, what data should we focus on regarding stablecoins in the current market?

I believe we should pay more attention to the changes in stablecoin inflows into major exchanges. Historically, surges in stablecoin inflows have coincided with local tops or bottoms, usually indicating an increase in volatility. The most recent surge exceeded $92.5 billion, marking one of the highest inflow levels ever recorded.

Although the Crypto market has experienced significant volatility, the ups and downs are bringing about more changes, which are also pushing the industry forward, even if not perfectly aligned with price changes.

As a fun news report from last week noted, according to the Financial Times citing informed sources, asset management giant Fidelity Investments is advancing the issuance of its own stablecoin, currently in the late testing phase, indicating that more traditional financial giants are joining the stablecoin race.

We must acknowledge that stablecoins are currently the largest application in the Crypto market or blockchain, but the value changes and burdens brought by this underlying application may quietly alter something, as it can be seen as an expansion of Web3 users, albeit not yet bringing about a true qualitative change.

As for whether the Crypto market will ultimately benefit from the expansion of stablecoin market cap, there is an old saying: since you are here, don't be polite? As the saying goes, "A passing goose leaves a sound, and the wind leaves a trace," it will always lose some feathers.