Stablecoin supply on Ethereum fell by around $7 billion last week, dropping from $162 billion to $155 billion, according to on-chain data from analyst Darkfost. This is the first sharp weekly contraction in ERC-20 stablecoins of the current market cycle, signaling thinning liquidity as prices correct and capital moves elsewhere.
Darkfost noted that a declining stablecoin market cap often reflects investors converting digital dollars back into fiat, which leads issuers to burn excess supply. Similar patterns appeared in 2021 during Bitcoin’s prolonged downturn.
Exchange flows reinforce the trend. Binance recorded its largest weekly outflows since November 2025, with over $6 billion leaving across BTC, ETH, and ERC-20 USDT. Meanwhile, USDT on Tron saw an inflow of $905 million, suggesting some network shifts rather than total exits.
The outflows coincide with Bitcoin slipping below $88,000, extending its weekly losses past 5%, and indicate heightened volatility rather than a clear market direction.
Liquidity pressure is compounded by macro factors. Binance’s USDT reserves fell from $9.16 billion to $4.6 billion in under two weeks, and U.S. Federal Reserve net liquidity declined by roughly $90 billion, historically weighing on risk assets.
While long-term expectations for stablecoins remain optimistic, recent on-chain data shows traders are reducing exposure, leaving crypto markets with less immediate liquidity support..
