Warning Sign for Crypto: Stablecoins See Historic $7B Weekly Dip

Stablecoin supply on the Ethereum network fell by roughly $7 billion over the past week, dropping from $162 billion to $155 billion, according to on-chain data shared by analyst Darkfost. The move stands out because it is the first sharp weekly contraction in ERC-20 stablecoins during the current market cycle, adding to signs that liquidity is thinning across crypto markets as prices correct and capital shifts toward other asset classes. Stablecoin Supply Shrinks as Capital Leaves Exchanges Darkfost wrote that a falling stablecoin market cap usually means investors are converting digital dollars back into fiat, reducing demand for on-chain liquidity. When this happens, stablecoin issuers typically burn excess supply, causing total capitalization to fall. The on-chain technician described the trend as bearish, noting that similar behavior appeared in 2021 as Bitcoin entered a prolonged downturn, though that period also included the later collapse of Terra’s UST. Other data points support the idea of capital moving out rather than rotating within crypto alone, with CryptoOnchain reporting that Binance recorded its largest weekly net outflows since November 2025. For the week starting January 19, BTC saw about $1.97 billion in net outflows, Ethereum about $1.34 billion, and ERC-20 USDT roughly $3.11 billion. Combined, more than $6 billion left the exchange across major assets. But not every stablecoin flow was pointing in the same direction. While Ethereum-based USDT exited Binance, USDT on Tron posted an inflow of about $905 million, suggesting some investors are shifting networks rather than fully abandoning centralized platforms. Still, the fact that both risk assets and stablecoins moved out at the same time often lines up with periods of higher volatility rather than clear price direction. The timing also overlaps with recent price weakness. Bitcoin slipped below $88,000 on January 25, extending a pullback that began earlier in the month and pushing weekly loss...