Crystal Foresight Stablecoin Industry Report: What is Driving the Decline in Stablecoin Supply in Q2 2026

Original Title: What drove the stablecoin supply down

Original Author: Hannah Curtis, Head of Crystal Foresight Product

Original Compilation: @lufeieth

The following is the complete translated report text, chart explanations, data tables, FAQs, source notes, and disclaimers.

What Drove the Stablecoin Supply Down

The stablecoin market reached a record of nearly $320 billion in May. By July 14, the market size had dropped to $306.5 billion, a decrease of $11.5 billion over 90 days, a decline of 3.6%, marking the first quarterly contraction in nearly three years.

This decline is real but highly concentrated. Only a few stablecoins contributed to almost all of the supply contraction, and the reasons for each stablecoin's decline vary. The following will explain which stablecoins changed and the reasons behind them.

Core Conclusions

The supply has experienced a real and concentrated contraction. The net supply of stablecoins decreased by $11.5 billion. These funds have been redeemed, not merely transferred between different wallets or networks. Several stablecoins contributed to almost all of the decline.

The reasons for the decline of different stablecoins vary. The supply of USDe and USDS decreased due to yield adjustments. The supply of USDC decreased due to a cooling demand for DeFi collateral. USDT remained largely unchanged, with its changes primarily stemming from strategic choices, with little relation to yields.

Different stablecoins are interconnected through underlying funding channels. The redemption and withdrawal of USDe alone caused a reduction of about $2 billion in USDC reserves at Ethena.

The decline of gold-backed tokens comes from entirely different reasons. With the pullback in spot gold prices, the total market capitalization of PAXG and XAUt decreased by about $900 million. This is unrelated to changes in the stablecoin market itself.

Some growth relies on subsidized purchases rather than natural demand. The fastest-growing USDG relies on a yield-sharing reward program for expansion. As long as the incentives stop, this portion of the supply may also leave.

I. After the Record, a Real Decline in Supply

For most of 2026, the supply of stablecoins continued to rise. In mid-May, the total size of stablecoins reached a historic high of $320.4 billion.

As of July 14, over 90 days, the supply of stablecoins decreased from about $318 billion to $306.5 billion, a reduction of $11.5 billion, or 3.6%. The current size is nearly $14 billion lower than the peak in May.

This is the first quarterly supply contraction since the end of 2023. The dollar-denominated decline in June alone was the largest single-month drop since the Terra collapse in 2022.

Stablecoins are destroyed when redeemed, so this decline represents funds flowing back from on-chain to bank dollars, indicating a real outflow of funds, not a stablecoin de-pegging.

The reasons for this decline are worth further dissection, as it is extremely uneven. When breaking down the market by specific coins, it can be seen that the supply contraction is concentrated in a very short list, and each stablecoin has its own reasons for decline.

Chart Explanation: The stablecoin market size first rose to a record high in May, then decreased by $11.5 billion over 90 days. The data covers the total market capitalization of all tracked stablecoins in 2026.

Data Source: DefiLlama.

II. Different Stablecoins Serve Different Functions

Although these stablecoins are superficially all "one dollar on-chain," their actual uses vary greatly.

Crystal's "transfer fingerprint" analysis can identify these differences:

USDC and USDS primarily belong to collateral-type stablecoins. About 58% and 80% of their trading volume is related to inflows and outflows in the lending market.

USDe primarily belongs to yield-type stablecoins, with nearly 40% of activity occurring in yield protocols.

USDT is mainly used for payments and trading. About half is regular transfers, roughly a quarter is exchange fund flows, and its use as collateral is relatively low.

The scenarios in which a stablecoin primarily exists determine what factors can drive changes in its supply. This also explains why different stablecoins experienced completely different impacts in the same quarter.

Chart Explanation: The same one dollar serves different functions on-chain. The chart shows the proportion of total transfer volume of each stablecoin over the last 7 days, categorized by activity type.

Data Source: Crystal Intelligence transfer fingerprint data.

III. Which Stablecoins Changed

Five stablecoins contributed to almost all of the supply contraction:

USDC decreased by $5.8 billion

USDe decreased by $2 billion

USDS decreased by $2 billion

USDT decreased by $1.4 billion

PYUSD decreased by $1.2 billion

Two other gold-backed tokens also saw declines, which will be explained separately later.

Meanwhile, a small number of stablecoins achieved growth:

USDG increased by $829 million

USD1 increased by $338 million

DAI increased by $251 million

RLUSD increased by $67 million

The total supply increase of these growth-type stablecoins only amounts to about one-fifth of the decrease in the declining stablecoins.

The table below lists the complete data, including two gold-backed tokens that appeared in the chart but were not separately named in the text above.

Chart Explanation: The supply decline is highly concentrated. The chart shows the 90-day supply changes of each coin, measured in billions of dollars. USDS data comes from DefiLlama, while the rest of the data comes from Crystal on-chain data.

IV. Gold-Backed Tokens Belong to a Completely Different Market

PAXG and XAUt track spot gold prices, and their changes reflect gold demand rather than dollar redemption demand.

Compared to the historical record of over $5,590 per ounce in January 2026, spot gold prices have dropped by about a quarter. The price drop is influenced by a stronger dollar and a weakening market expectation for Federal Reserve rate cuts.

Therefore, the decline of PAXG and XAUt reflects changes in the gold market more than the stablecoin market, providing limited explanatory power for stablecoin adoption. When analyzing dollar-pegged stablecoins in this report, these two should be viewed separately.

V. USDC: A Decline Hidden Beneath the Surface

The supply contraction contributed by USDC is very significant.

The transfer fingerprint of USDC explains why it is so easily affected by the cooling of DeFi. Only about one-tenth of USDC's trading volume comes from natural use cases, such as payments, regular transfers, and settlements.

Meanwhile:

• 58% of USDC's trading volume is related to collateral flows
• About one-fifth is related to DEX liquidity

USDC serves as operating capital in the DeFi ecosystem. Therefore, when DeFi activity cools, the supply of USDC will also contract accordingly.

The total transfer volume of USDC decreased by 46.5% compared to the previous week.

From the holder data's surface, the decline does not seem severe. The holdings of the top 500 addresses in USDC only decreased by $1.5 billion, while the total supply of USDC decreased by $5.8 billion.

However, this data is significantly distorted by a single factor: Hyperliquid's new USDC liquidity pool received an inflow of $4.9 billion.

This address, deployed by Coinbase, received a record transfer of about $4 billion implemented by Circle in June when USDC became Hyperliquid's native stablecoin.

This change belongs to a migration of USDC positions and should not be viewed as new demand.

Excluding this migration, the downward trend of USDC becomes very apparent:

• Exchange USDC balances decreased by $7.1 billion
• With the redemption and withdrawal of USDe, USDC in Ethena reserves decreased by $2 billion
• Smaller holder balances further decreased by $4.3 billion

A large capital aggregation masked a broader redemption trend.

USDC Holder Change Chart

The chart shows the contribution of different holder categories to the change in USDC supply over 90 days:

Chart Explanation: The decline has been masked but not disappeared. The chart breaks down the $5.8 billion decrease in USDC over 90 days by holder distribution, measured in billions of dollars.

Data Source: Crystal Intelligence.

VI. Brief Analysis of Other Stablecoins

USDe: Decreased by $2 billion, a decline of 34%

The yield growth of USDe has stagnated.

Throughout the spring, the perpetual futures funding rate gradually moved from negative to near zero, and the sUSDe yield dropped to the mid-single digits. About $1.5 billion in funds exited sUSDe staking products.

This is also part of a broader capital migration. Funds are moving from crypto-native yield products to tokenized U.S. Treasury products like BUIDL and USDY.

USDS: Decreased by $2 billion, a decline of 23%

Sky lowered the Savings Rate from 6.5% to about 3.6%, leading to the release of funds staked in sUSDS.

USDS shares the same reserve base as DAI, so the two should be observed together.

The combined supply of the two stablecoins decreased from about $13.2 billion to $11.5 billion. Part of this change is simply depositors exiting yield-encapsulated products and returning to regular DAI.

USDT: Decreased by $1.4 billion, a decline of 0.7%

USDT's overall change is minimal, and its changes primarily stem from strategic choices, with weak relation to yields.

Tether chose to keep USDT outside the MiCA and GENIUS Act frameworks without adjusting USDT itself to adapt to these regulatory systems. Demand constrained by regulation will be directed towards independent products like USAT.

This small-scale outflow of funds primarily stems from European trading platforms being required to delist USDT.

Therefore, the supply of USDT is subject to active limitations, which is different from a contraction caused by operational difficulties.

PYUSD: Decreased by $1.2 billion, a decline of 31%

The funding base of PYUSD in the DeFi lending market is highly sensitive to incentive changes, and these funds have ample reason to choose to exit.

In February, a proposal from the OCC created uncertainty regarding the compliance of the issuer's related yield programs. Meanwhile, PayPal reorganized PYUSD into a payment-priority business unit at the end of April.

USDG: Increased by $829 million, a growth of 40%

USDG is the fastest-growing stablecoin, but its growth primarily relies on capital subsidies.

The yield-sharing model of Global Dollar Network funds a new approximately 7% lending program on Robinhood's new chain while also injecting initial liquidity into Solana's lending pool. Most of the newly added USDG supply entered these scenarios.

Whether this type of growth can be sustained depends on how long the incentive program can be maintained.

USD1, RLUSD, and DAI Achieve Growth Through New Channels

Other growth-type stablecoins mainly rely on distribution channels and infrastructure expansion.

USD1 achieved a native launch on the Tempo payment network.

RLUSD made new institutional-level progress, including completing a cross-bank tokenized U.S. Treasury settlement with JPMorgan and Mastercard on the XRP Ledger.

DAI forms a mirrored relationship with USDS within the Sky system.

VII. Comprehensive Conclusion

No single conclusion can explain the changes in all stablecoins this quarter, which is the most important conclusion of this report.

When judging the trends for the next quarter, two patterns are worth noting.

First, most of the supply decline can be traced back to Ethena and Sky lowering yields, rather than a loss of market confidence.

This mechanism can operate in reverse. If on-chain yields rise or interest rates fall, the same stablecoin supply may flow back in at a rate close to that of previous exits.

Second, USDC has a high exposure to the DeFi collateral cycle. This means that USDC will continue to follow DeFi market sentiment fluctuations more closely in the future, rather than simply following the overall sentiment changes in the stablecoin industry.

Next, attention should be paid to:

• Whether Ethena's funding rate trading can revert to positive yields
• Whether Sky will readjust and raise the Savings Rate
• How the OCC will clarify its regulatory stance on the issuer's related yield programs, which is particularly important for PYUSD

Yield fingerprints and collateral fingerprints are more important than the headline number of total stablecoin supply. When the market reaches an inflection point, the earliest signals will appear in these indicators.

VIII. Frequently Asked Questions

Does this decline mean that a certain stablecoin has de-pegged?

No.

The stablecoins discussed in this report have all been destroyed through normal redemption processes, and there has been no de-pegging.

A decrease in supply means that funds are flowing back from on-chain to bank dollars. To judge de-pegging, one should observe the stablecoin price rather than the supply. The stablecoins involved in this report have not experienced de-pegging.

Why did gold-backed stablecoins and dollar stablecoins decline simultaneously?

The reasons for their declines are different.

PAXG and XAUt track spot gold prices, not dollar redemption demand. Their supply scales decline with the overall pullback in the gold market, with limited relation to unique factors in the stablecoin market.

What is a "transfer fingerprint"?

A "transfer fingerprint" is Crystal Foresight's classification of the actual use of each transfer.

Categories include:

• Collateral flows in the lending market
• DEX liquidity
• Yield product deposits
• Exchange fund flows
• Regular payments

This metric reveals what scenarios a stablecoin is used in, rather than just showing its transfer scale.

Can this supply contraction be reversed?

Some of the contraction has the potential to reverse.

A significant portion of the decline stems from yield programs being cut rather than permanent demand disappearing.

If Ethena's funding rate trading reverts to positive yields, or if Sky raises the Savings Rate, some of the stablecoin supply may return.

Why should USDS and DAI be discussed together?

USDS and DAI use the same Sky reserve base.

When depositors exit the staked sUSDS and switch to regular DAI, the data will simultaneously reflect a decline in one stablecoin and an increase in another.

If one stablecoin is observed in isolation, the internal capital migration between the two will be overlooked.

IX. Sources and Notes

The stablecoin supply and transfer fingerprint data come from Crystal Intelligence's on-chain data as of July 14, 2026, and have been cross-verified with DefiLlama data.

The differences between the data of various coins are controlled within about 1%.

The background of gold prices comes from public market reports, including the record high in January 2026 and the subsequent price pullback.

Off-chain driving factors come from public reports, including:

• CoinDesk
• Cointelegraph
• crypto.news
• Circle's implementation of a record transfer of about $4 billion on June 12, 2026
• Announcements from stablecoin issuers and protocol releases

Analysis regarding USDT, MiCA, GENIUS Act, and USAT references public reports and information disclosed by Tether.

X. Disclaimer

This analysis is for informational reference only and does not constitute financial or investment advice.

On-chain supply and transfer fingerprint data are directional data reflecting the information available as of July 14, 2026.

The classification of entities and functions is derived from the balances and transfer activities of each stablecoin's largest holder addresses. The relevant classification is used to illustrate where the supply is concentrated and does not constitute a complete verification and adjustment of the total supply.

Off-chain driving factors represent possible reasons and do not confirm causal relationships.

Data sources: Crystal Intelligence, Dune, and DefiLlama.

Translator's Note: Differences in Data Standards in the Original Report

There are a few minor discrepancies between the main text, tables, and charts of the original report, and the above translation retains the original numbers from each section:

1. USDS shows a decrease of $2 billion in the table, while the chart shows a decrease of about $1.9 billion.
2. PYUSD shows a decrease of $1.2 billion in the table, while the chart shows a decrease of about $1.3 billion.
3. The holder breakdown for USDC listed in the main text, including numbers for exchanges, Ethena, and smaller holders, does not fully align with the numbers in the waterfall chart.
4. The total market size of stablecoins in the main text is $306.5 billion, while the end of the chart marks about $306.2 billion.

The report also states in the disclaimer that on-chain attribution is directional estimation and cannot be fully adjusted to the total supply.

For USDC, the core takeaway of this report can be summarized as:

The most important insight regarding USDC from this report is that while USDC has become the core asset of on-chain dollar liquidity, the current demand structure still heavily relies on DeFi.

When DeFi expands, USDC grows rapidly as collateral, margin, and liquidity assets; when DeFi cools, this portion of operating capital will also shrink rapidly.

For Circle, the key to determining the stability of profits and valuation ceiling in the future lies in whether it can upgrade USDC from DeFi operating capital to a foundational dollar asset in payments, corporate treasury, RWA settlements, and institutional financial systems.