ERC-20 stablecoins log first major cap drop of this market cycle

ERC-20 stablecoin market cap on Ethereum just fell $7b in a week, signaling investors may be exiting crypto entirely instead of rotating risk.

The ERC-20 stablecoin market capitalization has declined by several billion dollars over the past week, marking the first significant drop of this market cycle, according to data shared by CryptoQuant analyst Darkfrost.

Stablecoin inflows continue to decrease

The market cap of stablecoins running on the Ethereum network fell by approximately $7 billion, representing a departure from the growth trend observed during the second half of 2025, Darkfrost stated in a post on X.

Stablecoins are cryptocurrencies with prices pegged to fiat currencies, most commonly the U.S. dollar. Market participants typically hold these assets to avoid volatility associated with Bitcoin and other digital currencies. The supply of stablecoins is often viewed as potential capital available for deployment into more volatile cryptocurrencies.

Data presented by Darkfrost showed that ERC-20 stablecoin supply grew during the latter part of 2025, coinciding with rallies in Bitcoin and other digital assets. The growth indicated net capital inflows into the cryptocurrency sector during that period.

When volatile cryptocurrencies experienced a bearish shift, stablecoin market capitalization plateaued, according to the data. This indicated that capital flows into stablecoins had stopped, though outflows had not yet begun.

The recent decline broke this sideways pattern, with the stablecoin market cap registering its first notable drop in years. Bitcoin (BTC) prices also declined during the same period, according to market data.

Darkfrost characterized the development as a negative signal, suggesting that some investors are exiting the cryptocurrency market entirely rather than rotating capital between different digital assets. The analyst noted this coincides with gains in precious metals and continued strength in equity markets.

The decline represents the first rapid drop in stablecoin market capitalization during the current market cycle, according to the analysis. Bitcoin prices have recovered partially from lows reached on Sunday, market data showed.