The stablecoin sector is flashing conflicting signals. DeFiLlama data checked on October 26 shows total stablecoin market capitalization at about $300.1 billion, while Tether’s USDT remains dominant at roughly $182.3 billion, or about 60.7% of the market. Circle’s USDC ranks second at approximately $71.7 billion.
However, the same data shows weekly supply contraction. USDT’s supply fell by $1.11 billion, or 0.61%, over seven days, while USDC’s supply dropped by $1.01 billion, or 1.39%. That combined decline of $2.12 billion suggests that capital is leaving stablecoins rather than switching between them.
Melbourne-based digital asset firm Zerocap reported a third consecutive week of heavy stablecoin outflows. OTC trader Oliver Davis described “another pronounced off-ramping week as risk appetite deteriorated,” with clients moving proceeds into U.S. dollars almost one-for-one and keeping them in cash. The desk’s October 26 weekly market wrap said Bitcoin and Ether traded in small sizes with no clear direction, while Solana and XRP drew only isolated interest. Stablecoins and foreign exchange made up most of the volume.
The shift accelerated over three weeks. In the October 12 report, clients were off-ramping USDT significantly, while USDC saw its strongest on-ramping week of the year. By October 20, USDT outflows were among the largest of the year, but clients were still moving into USDC and using the Australian dollar stablecoin AUDD as a local route into dollar stablecoins. That was also the week the European Banking Authority classified USDC as the first significant e-money token under the EU’s MiCA rules. By October 26, USDC buying had faded to balance, and AUDD was again significantly net sold. Clients moved from switching between stablecoins to stepping out of them.
This movement matters because stablecoins function as crypto’s waiting room. A Kansas City Fed briefing estimated that about 48.8% of stablecoins are held as trading assets, compared with just 0.7% used for payments. Zerocap’s clients did not park capital there, choosing cash instead.
The interest-rate backdrop reinforces the exit. Circle reported a reserve return rate of 3.48% in the second quarter of 2026, with reserve income making up about 95% of its revenue. Under the U.S. GENIUS Act, payment stablecoin issuers cannot pay holders interest simply for holding the coin. Zerocap expects the Federal Reserve to hold its policy rate in the 3.75% to 4.00% range this week, and upcoming earnings from Alphabet, Microsoft and Amazon are seen as the next tests for risk appetite.
Even with the latest outflows, the longer-term story remains expansionary. Circle CEO Jeremy Allaire told Reuters that the company plans to expand USDC into about 40 additional emerging and developing markets, targeting demand for dollar access, international transfers and blockchain-based financial services. USDT still has more than twice the circulating supply of USDC, and its advantage is especially strong in crypto trading and emerging markets. USDC is positioned around regulatory compliance and institutional integration, and its expansion could narrow that gap if Circle delivers on distribution, regulation and liquidity.
For now, the market is split between short-term de-risking into cash and a long-term push to make stablecoins core payment and settlement infrastructure.
