The stablecoin market has evaporated US$10 billion, with monthly decline the largest since the Terra

The stablecoin market shrank by US$10 billion, the largest monthly decline since the Terra collapse.

The stablecoin sector experienced its largest monthly decline since the TerraUSD crash in 2022, with its total market value down by approximately US$10 billion from its May peak. Although this is the worst monthly decline in more than two years, the contraction is only about 3% of the sector's total value, indicating that most of the gains from recent growth remain.

Mainstream stablecoins lead the contraction

The circulation supply of Tether (USDT), the world's most widely used stablecoin, has dropped from nearly US$190 billion to US$184 billion in recent weeks. Circle's USD Coin (USDC) also contributed to the sector's decline, with its total supply falling to approximately $73 billion over the same period. As the two largest U.S. dollar anchored stablecoins, USDT and USDC jointly dominate the liquidity of centralized and decentralized exchanges on the chain.

Despite the significant decline in the size of the U.S. dollar, the total market value of stablecoins is still much higher than it was before the recent expansion phase, indicating that adoption rates in the cryptocurrency ecosystem continue to grow.

Market analysts pointed out that the recent outflows of stablecoins are consistent with factors such as declining risk appetite for digital assets, continued outflows of spot bitcoin ETFs, and macroeconomic uncertainty affecting investors 'overall participation in the cryptocurrency market.

Liquidity and Trading Activities

As the main source of liquidity in the cryptocurrency market, stablecoins are widely used to move funds in and out of digital asset positions without having to convert back to traditional fiat currency. The decline in the supply of stablecoins is often interpreted as a sign that capital is withdrawing from the cryptocurrency market or is in a wait-and-see state, and recent data is consistent with this sentiment.

Data shows that the combined supply of USDT and USDC has been declining since early May, reflecting slowing trading activity and reduced inflows of institutional funds into the sector. This decrease overlaps with consecutive weeks of net outflows from U.S. spot Bitcoin ETFs, further demonstrating investors 'caution in June.

Despite these factors, stablecoin trading volume on centralized exchanges increased by 10.8% in June to nearly US$981 billion. This is the first monthly increase in five months, highlighting the centrality of stablecoins in daily cryptocurrency trading activities.

Growth in tokenized real-world assets

In contrast to the shrinking supply of stablecoins, tokenized real-world assets continue to expand. Driven by continued growth in tokenized U.S. Treasurys and public stocks, the total market value of these assets reached a record $30.1 billion in June. Tokenized treasury bonds alone grew to about $17 billion, while stock trading volume rose to a new high.

(Note: Tokenized real-world assets, or RWA for short, refer to the conversion of traditional financial assets such as government bonds, real estate or public stocks into digital tokens and transactions on the blockchain. This allows investors to acquire, trade and settle these assets with greater efficiency and transparency.)

These opposing trends suggest that even if short-term liquidity of stablecoins weakens, institutional interest in blockchain-based financial infrastructure remains strong.

Regulatory clarity and industry outlook

Regulatory progress has also boosted the stablecin market. Major issuers have recently obtained new licenses and expanded their institutional support for dollar-anchored digital assets.

Circle, the company behind USDC, has received U.S. regulatory approval to operate as a federally regulated trust bank. The move allows the company to directly manage reserves supporting the USDC and marks a deep integration between the digital asset industry and the traditional financial system.

With these changes, market observers are closely watching whether stablecoin issuance will rebound in the second half of the year. A renewed increase in supply could signal a return to the cryptocurrency ecosystem for capital, while a further decline could signal continued caution among investors.