With Bitcoin falling below the critical $70,000 level and bouncing back above $60,000, the crypto market has entered a vulnerable phase, but this zone is increasingly acting as a gravitational pull rather than a launching pad.
This subdued price movement comes amid a surge in the stablecoin market, with Tether and Circle issuing billions of dollars worth of new tokens in recent days.
At first glance, the growing supply of digital dollars appears to signal an influx of new liquidity into the ecosystem. However, a closer look at the flows reveals a more cautious and structurally constrained market.
Stablecoins serve as the cryptoeconomy's primary liquidity rail, enabling trading, leverage, settlement, and capital movement without touching the traditional banking system.
As a result, changes in issuance and movement are often scrutinized for signals regarding market direction.
In this example, the discrepancy between the increase in issuance and the decrease in exchange flows highlights that the market is accumulating liquidity defensively rather than proactively deploying it.
Stablecoin minting accelerates
On February 4, blockchain analytics platform Lookonchain reported that Tether’s USDT and Circle’s USDC added a total of more than $3 billion in new supply in three days. This happened even though Bitcoin and other major tokens failed to maintain their upward momentum.
This rapid increase was further supported by Tether, which reported that USDT ended Q4 2025 with a market capitalization of $187.3 billion, an increase of $12.4 billion from the previous quarter.
The company said this growth occurred despite a contraction in the broader cryptocurrency market, which saw digital asset prices plummet following the October 2025 crash.
Historically, stablecoin issuance has tended to increase during periods of volatility. Traders often rotate into dollar-pegged tokens to preserve value while remaining in a position to quickly re-enter the market.
In some cycles, a rally may be preceded by a surge in issuance as new liquidity is provided to spot and derivatives markets. Elsewhere, it coincides with a long period of declines in stock prices, reflecting caution rather than conviction.
This episode seems to be closer to the latter. While supply is increasing, the destination and use of that liquidity is more important than the headline numbers.
Foreign exchange flows refer to liquidity withdrawal, not deployment.
CryptoQuant data suggests that the crypto market is experiencing a continued decline in liquidity in the face of risk.
Stablecoin market capitalization peaked in late 2025 after expanding by more than $140 billion since 2023, before starting to decline in December.
But more important than the total supply is the net flow of stablecoins into and out of exchanges.
During periods of increased risk appetite, stablecoins typically find their way to exchanges where they can be easily converted to BTC or ETH or used as margin for leveraged trades.
In contrast, outflows tend to indicate capital preservation as funds are moved from the exchange to self-custody or lower-risk uses.
In October 2025, foreign exchange flows reflected extraordinary momentum. According to CryptoQuant, average monthly net inflows for stablecoins exceeded $9.7 billion, of which Binance alone received nearly $8.8 billion.
This surge in liquidity coincided with Bitcoin hitting new all-time highs and supported increased leverage across derivatives markets.
Since November, this pattern has reversed. These inflows first declined sharply by about $9.6 billion, then almost disappeared, then stabilized briefly, and then began to flow again.
According to the data, net stablecoin withdrawals from exchanges have exceeded $4 billion, including about $3.1 billion from Binance.
This trend indicates increased risk aversion and, in some cases, capitulation by late market entrants.
Some of the outflows may also reflect internal exchange adjustments to reduce support for stablecoins, where the platform is underutilized due to weak demand.
Even taking these factors into account, continued withdrawals suggest that liquidity is retreating from where price discovery and leverage are most concentrated.
Stablecoin issuance and price become decoupled as liquidity becomes defensive
The disconnect between increases in issuance and decreases in exchange balances reflects an important distinction that is often lost in market narratives.
Stablecoin minting does not automatically translate into purchasing power for risk assets. Instead, it represents potential liquidity rather than developed liquidity.
In the current environment, that possibility seems to still be preserved. Stablecoins are increasingly being used as parking assets during times of uncertainty, allowing traders to remain within the cryptocurrency ecosystem without receiving directional exposure.
In derivatives markets, sufficient stablecoin balances may dampen fluctuations in funding rates and support hedging strategies, but do not necessarily drive spot demand.
Therefore, Bitcoin's current struggle to decisively rise despite the expanding supply of stablecoins reflects this dynamic.
Capital exists, but it is used to manage risk, not to express it.
This helps explain why BTC fell below $70,000 as it failed to gain sustained follow-through liquidity.
On the other hand, this pattern also contrasts with other asset classes.
CryptoQuant points out that although digital assets face a persistent liquidity shortage, capital continues to flow into equities and precious metals as macroeconomic uncertainty has not significantly curbed risk-taking.
Stablecoins will strengthen their role as infrastructure rather than catalysts
Despite short-term headwinds, the long-term trajectory of stablecoins remains one of structural growth.
The total stablecoin market will exceed $300 billion in 2025, establishing the digital dollar as the core layer of crypto market infrastructure.
Tether and Circle continue to dominate issuance and trading activity even as competition from new issuers and tokenized bank deposits increases.
Circle has emphasized USDC's regulatory stance and reserve transparency that favors institutional users, while Tether's global footprint makes USDT the dominant payments asset across offshore markets.
Together, these are increasingly enabling transactions, lending, and cross-border flows outside of traditional banking hours and channels.
This episode shows that infrastructure growth does not guarantee immediate price increases. Stablecoins are expanding as a payment and capital management tool, even as traders remain wary of investing their funds in volatile assets.
In the case of Bitcoin, the meaning is clear. The constraint is not a lack of funding in the system, but a lack of willingness to utilize that funding.
The rally is likely to face resistance until stablecoin flows return to exchanges and the funding landscape changes decisively.
In that sense, the recent wave of minting reflects the market waiting for clarity rather than a signal of an imminent rally.
