Shrinking stablecoin supply and renewed tariff uncertainty are creating a liquidity squeeze that analysts say is weighing on Bitcoin and limiting a broader crypto market recovery.
Digital asset platform Matrixport said stagnating stablecoin growth presents a “notable headwind” for Bitcoin and the wider ecosystem as capital rotates out of crypto into fiat and defensive assets.
“Stablecoins serve as the primary liquidity rail within digital assets and stagnation in supply often signals that capital is being off-ramped back into fiat rather than redeployed within crypto markets,”
Matrixport said in a post on X.
Data from CryptoQuant shows stablecoin supply has fallen by $5.6 billion this year to $153.4 billion, while stablecoin reserves on Binance have declined 19% since November 2025, underscoring tighter trading liquidity.
CryptoQuant chief executive Ki Young Yu said Bitcoin is in a “not digital gold” phase as its 90-day Pearson correlation with gold turned sharply negative near -0.75, while Bitget chief analyst Ryan Lee added that “the ongoing slide in Bitcoin and Ethereum reflects a broader risk-off macro backdrop, where tariff uncertainty, geopolitical tensions, and capital rotation into precious metals and AI-linked equities have thinned crypto liquidity and weakened narratives”.
Precious metals have outperformed digital assets this year, with gold and silver rising 19% and 21% respectively while Bitcoin has fallen 27%, according to TradingView data.
Tokenised commodities are also attracting flows, with Tether Gold market value climbing 20% to $2.7 billion over the past month and the broader tokenised commodities market surpassing $6 billion, reflecting a 53% surge in under six weeks as investors seek safe-haven exposure on blockchain rails.
At the time of reporting, Bitcoin price was $66,022.39.