Stablecoin Market Hits Roadblock as Crypto Trading Activity Declines

The stablecoin market has seen significant growth in recent years, but its expansion has stalled, just when the US Treasury market needs external buying support.

US Treasury Secretary Scott Bessent had envisioned that stablecoin companies could grow into trillion-dollar buyers of US Treasury bonds by the end of this decade. However, industry growth has now plateaued, and recent trends indicate that stablecoin issuers will struggle to alleviate pressure in the US Treasury market in the short term.

The total supply of stablecoins has plateaued after rapid expansion, with USDT's market size shrinking by nearly $3 billion in the first half of this year. Circle's main competitor, USDC, also experienced a similar decline, with its market size falling to around $72 billion.

Stablecoin issuers hold significant amounts of US Treasury securities and other highly liquid assets as reserves. Tether, for example, holds $134 billion in US Treasuries and Treasury-backed repurchase agreements, making it one of the top 20 holders of US debt.