The Paradox of Stablecoins: Capitalization Decreases, but Utility Increases

• The capitalization of stablecoins has recorded the largest monthly drop since 2022.
• Payments and tokenization are driving new uses for stablecoins.

The global stablecoin market has lost $13 billion since the all-time high reached on May 17. In just the last month, the contraction was $5 billion, the largest since the collapse of Terra-Luna in June 2022, when the loss of confidence in UST triggered a massive liquidity outflow from the cryptocurrency ecosystem.

At first glance, the reading seems evident: fewer stablecoins in circulation imply less liquidity available to invest in bitcoin (BTC) and other digital assets.

However, that explanation, in this market context, begins to fall short. While capitalization is decreasing, stablecoins continue to expand their presence in areas that were marginal just a few years ago: international payments, savings products, tokenization of financial assets, remittances, and even transactions executed by artificial intelligence (AI) agents.

This situation raises a question: does the drop in supply really reflect a loss of relevance, or are we facing a much deeper change in the function these assets serve?

Unlike in 2022, when the collapse was associated with the Terra crash and a crisis of confidence in the ecosystem, this time there is no single trigger. One possible explanation is that part of the capital has migrated towards assets with higher expected returns, driven by the rise of companies linked to AI and renewed interest in initial public offerings (IPOs) of technology companies. This capital rotation gained momentum after the historic IPO of SpaceX and the anticipation of future IPOs from tech firms like OpenAI and Anthropic.

But focusing solely on the drop in supply may obscure another transformation that is advancing in parallel.

For much of market history, stablecoins primarily functioned as a medium of exchange within the digital asset ecosystem. They were the place where investors parked capital before buying bitcoin or when exiting positions during periods of volatility. Their growth was closely tied to speculative activity. Not so much anymore.

A recent report from Binance Research states that stablecoins are undergoing a "metamorphosis of identity." According to the research, these assets are moving away from acting solely as a layer of liquidity to becoming a settlement infrastructure used by various financial services.

The data supports this transition. Today, 30% of Binance users hold more than half of their portfolio in stablecoins, compared to just 4% recorded in 2020. This behavior resembles that of a savings instrument rather than an asset used exclusively for trading in the markets.

The emergence of yield-bearing stablecoins has also altered this dynamic. Products backed by U.S. Treasury bonds offer returns close to 3% or 4% annually, well above the average yield of U.S. bank deposits, which stands around 0.38%.

In other words, some stablecoins no longer just preserve value; they generate income for those who hold them in their portfolios.

The tokenization of financial assets represents another sign of this evolution. An example is Stellar, whose stablecoin capitalization increased to $931 million, primarily driven by USDY and USDC, as reported by CriptoNoticias. In the case of USDY, the growth is directly related to the tokenization of U.S. Treasury bonds. That is, the stablecoin no longer functions solely as digital cash but as a vehicle to access traditional financial instruments through blockchain infrastructure.

According to Binance Research, the volume processed by Binance Pay grew by 114% year-on-year, and the median value of each payment rose from $10 to $18. More than a statistical increase, this data reflects that stablecoins are beginning to be used for larger commercial transactions, a sign of growing confidence in their ability to function as a means of everyday payment.

The report also identifies new applications that were virtually nonexistent just a few years ago. Among them are payments executed by AI agents and the growth of the foreign exchange market on cryptocurrency networks, which already moves tens of billions of dollars during weekends when traditional markets are closed.

All of this suggests that the economic function of stablecoins is diversifying.

This does not mean that capitalization has ceased to matter. However, using that metric exclusively to evaluate the evolution of the sector may become increasingly unrepresentative.

Perhaps the true paradox is not that the stablecoin market is losing capitalization while gaining utility. The paradox is that we continue to try to measure an increasingly complex financial infrastructure with an indicator designed for an era when these assets were simply a gateway to the cryptocurrency market.