Analyst Sees Long-Term Growth Despite $10 Billion Decline in Stablecoin Market Cap

MarketsThe stablecoin market cap has decreased by approximately $10 billion since its peak in May, with a notable $7.7 billion drop occurring in June alone.

June's decline was the largest since the May 2022 Terra-Luna crash, but one analyst believes stablecoins are set to rebound in the long term.

By Krisztian Sandor|Edited by Stephen Alpher Jul 12, 2026, 1:00 p.m. 3 min read

• The total stablecoin market has contracted by about $10 billion since May, including a $7.7 billion drop in June.
• However, this only represents a 3% decline, which is relatively minor compared to the 26% drop seen during the 2022 crypto bear market.
• Emerging regulated issuers are beginning to challenge the dominance of USDT and USDC, according to recent data.

In June, the stablecoin market experienced its largest decline in several years, signaling a decrease in on-chain liquidity as cryptocurrency markets continued to stabilize near 2026 lows.

The $7.7 billion drop in stablecoin market capitalization last month was the most significant since the collapse of the Terra-Luna blockchain protocol in May 2022, which initiated a severe bear market often referred to as crypto winter, as reported by CoinDesk Data.

When looking at the total stablecoin value in circulation, it has fallen by about $10 billion since its May peak, according to RWA.xyz data. This decline represents a 3% drop, which is the largest since 2023 but still significantly less than the 26% drop seen in 2022.

The downturn has been primarily driven by the two leading stablecoin issuers. Tether's USDT, the largest stablecoin, has seen its market cap decrease from approximately $190 billion in May to around $184 billion, a loss of about $6 billion. Meanwhile, Circle's USDC has dropped from nearly $80 billion in March 2026 to about $73 billion, shedding another $7 billion.

This decline is noteworthy as it contradicts the positive outlook from Wall Street banks regarding stablecoin growth. Last year, Citi revised its 2030 stablecoin market forecast to $1.9 trillion in its base case and $4 trillion in a bullish scenario, an increase from $1.6 trillion and $3.7 trillion, respectively. Similarly, Standard Chartered projected a $2 trillion market by 2028.

The contraction also holds broader implications for the cryptocurrency market. Major stablecoins serve as key quote currencies for crypto trading and are increasingly used for payments and settlements, making their supply fluctuations a crucial indicator of liquidity trends in digital assets.

Comparing to the 2022 Crypto Winter

While the current pullback may appear significant, it is relatively minor when viewed in a historical context.

A similar situation occurred from December 2025 to February 2026, when stablecoin supply decreased by roughly $9 billion before rebounding to a new all-time high. This period coincided with a major correction in cryptocurrencies, with Bitcoin falling from around $95,000 to $60,000.

The stablecoin market has remained largely stable around $300 billion since October, which aligns with Bitcoin reaching its record high of $126,000, after experiencing over two years of growth.

In contrast, the 2022 bear market, marked by the collapses of major entities like the FTX exchange and lenders such as Celsius, BlockFi, and Genesis, was much harsher for stablecoins.

Data from RWA.xyz indicates that the combined market cap of major stablecoins dropped from approximately $166 billion in March 2022 to $122 billion by September 2023, a decline exceeding 26% as investors withdrew from the digital asset space.

During this time, Tether's USDT fell from $78 billion to $65 billion between March and November 2022. USDC’s downtrend was more prolonged, dropping from $55 billion in July 2022 to under $24 billion by November 2023, exacerbated by the collapse of its banking partner Silicon Valley Bank in March 2023.

Additionally, the failure of TerraUSD, the algorithmic stablecoin associated with the Terra-Luna project, eliminated $18 billion from the stablecoin market.

Despite the current decline, one analyst views it as merely a temporary setback within a long-term growth trend. Paul Howard, senior director at trading firm Wincent, stated, "The recent decline in stablecoin market cap represents a relatively small pullback in what we believe is a long-term growth market. Short-term fluctuations in liquidity are normal, but they don’t change our view that stablecoins will continue to play an increasingly important role in the digital asset ecosystem."

The Rise of New Stablecoin Competitors

Beyond the overall decline, the situation exhibits a more complex narrative.

Part of the slowdown can be attributed to a shifting competitive landscape. As stablecoins expand beyond crypto trading and into mainstream payment systems, new issuers have emerged following regulatory advancements like the GENIUS Act in the U.S.

While Tether's USDT and Circle's USDC have both seen a recent decline in supply, several smaller competitors are gaining ground. The Global Dollar (USDG), issued by Paxos and supported by a consortium that includes Robinhood, has surpassed $3.2 billion in circulation, while USDGO, issued by Anchorage Digital in collaboration with Hong Kong's OSL Group, has nearly doubled to $900 million, according to CoinGecko data.

Furthermore, more competition is anticipated. OpenUSD, which is backed by a coalition of payment and financial firms, is one of several newcomers aiming to challenge the supremacy of USDT and USDC.

Nevertheless, stablecoin growth has historically been linked to bull markets, as they provide essential on-chain purchasing power. A shrinking total supply may hinder cryptocurrency markets, complicating efforts for digital currencies to maintain upward momentum unless new demand arises.