Why is the growth of stablecoins slowing down? Uncovering the underlying reasons behind the increasing resistance to the crypto market rally

In the crypto market, stablecoins are not only tools for converting fiat currency to digital assets but also key indicators of potential purchasing power. When investors are optimistic about the future, they typically convert fiat into USDT or USDC and transfer it to exchanges, driving up the overall market capitalization of stablecoins.

However, recent data signals the opposite. Since October 2025, the global stablecoin market cap has been fluctuating narrowly above $310 billion, with growth momentum no longer matching the robust 150% surge seen between 2024 and 2025. This stagnation indicates that no new fiat funds are entering the crypto ecosystem through stablecoins. More concerning is the rapid depletion of stablecoin reserves at major exchanges. Shrinking reserves usually mean investors are converting assets into fiat and withdrawing from the market, rather than holding stablecoins off-chain waiting for a bottom.

As of February 24, the total market cap of crypto stablecoins stands at $314.6 billion, about 14.3% of the total market capitalization.

Macro Headwinds Intensify, High-Beta Assets Face Sell-Off

The slowdown in stablecoin growth is not an isolated event but a direct reflection of dramatic changes in the global macro environment. According to Matrixport’s latest report, the deceleration in stablecoin growth not only suppresses Bitcoin (BTC) but also creates resistance for the entire crypto ecosystem.

Currently, the market is experiencing a dual shock from de-globalization and structural shifts driven by artificial intelligence (AI). Wintermute’s market update shows funds are flowing from growth stocks into value sectors like gold and commodities, while crypto assets—often considered “high-beta growth assets”—are being systematically sold off.

This shift in capital flows is especially evident in derivatives markets. Data shows funding rates are at multi-month lows, put options premiums are rising steadily, and open interest has been declining since October 2025. Even when Bitcoin prices temporarily stabilize, institutional demand has not returned, and trading desks remain predominantly sellers.

As of February 24, market sentiment has plunged into extreme fear. The crypto fear index dropped to 11, indicating “extreme panic.” Bitcoin is consolidating around $63,000, while Ethereum (ETH) has fallen below the $1,900 psychological level and is currently struggling near $1,820.

Rate Expectations Shift, Liquidity Gates Tighten

Beyond internal capital flows, external macro liquidity conditions are also tightening. The Federal Reserve’s shift in monetary policy has become another heavy weight on the market.

Although the market widely expected a rate cut cycle in 2026, recent data has completely reversed that outlook. CME futures data shows a 95.5% probability that rates will hold steady in March. Fed Governor Waller recently stated that if employment data remains strong, he favors keeping rates unchanged at the March meeting.

This means that, in the short term, it will be difficult for the global markets to see the Fed’s liquidity “easing.” For the crypto market, which is highly sensitive to funding costs, this prolongs the period of liquidity drought.

CryptoQuant analyst Darkfost commented, “One of the main headwinds constraining the market right now is the lack of new liquidity injections. From a broader cross-market liquidity perspective, the short-term outlook remains bleak.”

Regulatory Tightening and Structural Reshaping of Stablecoins

Apart from liquidity issues, stablecoins themselves face regulatory restructuring. In February 2026, China’s PBOC and seven other agencies jointly issued a document reaffirming the ban on virtual currencies domestically and explicitly prohibiting the issuance of stablecoins pegged to the RMB outside of approved channels.

While primarily targeting China, this policy signals a broader message. Stablecoins, as “digital dollars,” are increasingly tied to the US Treasury market. Standard Chartered predicts that by 2028, the stablecoin industry could generate up to $1 trillion in new demand for US short-term government debt.

This suggests that future stablecoin growth will be influenced not only by market sentiment but also by major geopolitical monetary policies and regulatory frameworks. US Treasury Secretary Scott Bessent recently mentioned that the market size of US dollar stablecoins could expand to $3 trillion in the coming years. However, in the short term, regulatory uncertainty remains a looming sword of Damocles over the market.

Conclusion

Overall, the slowdown in stablecoin growth is not merely a short-term technical correction but a combined result of macro liquidity withdrawal and regulatory restructuring. As of February 24 on Gate, mainstream assets remain in consolidation, with Bitcoin struggling around $63,000 and Ethereum seeking support near $1,800.

For a trend reversal, the market needs to see stablecoin market cap re-enter an expansion phase, which requires new external capital inflows. As analysts note, stagnant stablecoin supply often indicates funds are withdrawing from on-chain assets and flowing back into fiat, rather than remaining in crypto to rotate positions.

Until liquidity gates reopen, investors may need to accept a harsh reality: the crypto market has shifted from a “high-growth phase” to a “stockpile game.” For traders, rather than blindly guessing bottoms, paying close attention to stablecoin market cap—this most genuine liquidity indicator—may be the best approach. Only when stablecoins resume growth can the market truly look forward to a recovery.