The stablecoin market has cooled after a rapid expansion last year, as lower trading volumes and a weaker US dollar cut demand for dollar-pegged tokens. Data shows that stablecoins added about $103 billion to supply last year, pushing total supply past $300 billion by October (Data shows).
The market peaked in October amid a severe leverage wipeout, and investor appetite has since fallen. (Ed. note: October saw the crypto market’s worst-ever leverage wipeout.)
Kaiko analysts cite two main causes: lower trading activity and a decline in the dollar’s purchasing power. Traders also face lower yields around 4%, reducing incentives to hold dollar-denominated stablecoins.
Scott Bessent previously projected much larger adoption, including a $3 trillion stablecoin market by 2030, a forecast linked to broader institutional interest (forecast). Banks and firms continue pilots, however, including initiatives by Visa, the New York Stock Exchange, BlackRock, and JPMorgan to use or issue stablecoins.
Market sentiment remains cautious. Bitwise Asset Management research analyst Danny Nelson said “The market’s main driver right now is fear. Fear that we’ll go lower.”
Analysts expect longer-term growth if stablecoins embed into financial infrastructure through tokenisation. Sygnum Bank CIO Fabian Dori said “What reverses this is renewed activity within the ecosystem or economic use.”
Tokenisation and institutional settlement use could tie stablecoin demand to real finance rather than trading. Bitcoin traded at $67,435, down 0.6%, while Ethereum traded at $1,984, up 0.7%.
