Warning Sign for Crypto: Stablecoins See Historic $7B Weekly Dip

Stablecoin supply on the Ethereum network fell by roughly $7 billion over the past week, dropping from $162 billion to $155 billion, according to on-chain data shared by analyst Darkfost.

The move stands out because it is the first sharp weekly contraction in ERC-20 stablecoins during the current market cycle, adding to signs that liquidity is thinning across crypto markets as prices correct and capital shifts toward other asset classes.

Stablecoin Supply Shrinks as Capital Leaves Exchanges

Darkfost wrote that a falling stablecoin market cap usually means investors are converting digital dollars back into fiat, reducing demand for on-chain liquidity. When this happens, stablecoin issuers typically burn excess supply, causing total capitalization to fall.

The on-chain technician described the trend as bearish, noting that similar behavior appeared in 2021 as Bitcoin entered a prolonged downturn, though that period also included the later collapse of Terra’s UST.

Other data points support the idea of capital moving out rather than rotating within crypto alone, with CryptoOnchain reporting that Binance recorded its largest weekly net outflows since November 2025. For the week starting January 19, BTC saw about $1.97 billion in net outflows, Ethereum about $1.34 billion, and ERC-20 USDT roughly $3.11 billion. Combined, more than $6 billion left the exchange across major assets.

But not every stablecoin flow was pointing in the same direction. While Ethereum-based USDT exited Binance, USDT on Tron posted an inflow of about $905 million, suggesting some investors are shifting networks rather than fully abandoning centralized platforms.

Still, the fact that both risk assets and stablecoins moved out at the same time often lines up with periods of higher volatility rather than clear price direction.

The timing also overlaps with recent price weakness. Bitcoin slipped below $88,000 on January 25, extending a pullback that began earlier in the month and pushing weekly losses beyond 5%.

Liquidity Pressure Meets Macro Headwinds

There was also additional context from Binance flow data shared by analyst Amr Taha over the weekend. He noted that the exchange’s USDT reserves fell from $9.16 billion on January 7 to $4.6 billion by January 24, a reduction of more than $4.5 billion in under two weeks. During the same period, Bitcoin inflows to the exchange picked up as prices briefly recovered above $95,000, a pattern Taha linked to profit-taking rather than fresh risk appetite.

The market watcher also pointed to tightening conditions outside crypto, with U.S. Federal Reserve net liquidity falling by about $90 billion between January 21 and January 24, based on changes in Treasury and reverse repo balances. Historically, contractions in system-wide liquidity have weighed on risk assets, including digital currencies.

The short-term picture contrasts with longer-term expectations. In a January 1 post, a16z Crypto argued that stablecoins could eventually handle payments at a scale comparable to global card networks. For now, however, the latest on-chain data suggests that traders are pulling back exposure, leaving crypto markets with less immediate liquidity support.

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