The cryptocurrency rout that began in early October contained a message for investors about stablecoins, the digital assets that promise 1 for 1 convertibility into dollars or some other hard currency.
Stablecoins are widely used as the medium of exchange when trading in and out of cryptocurrencies. With the passage of the GENIUS Act in July, there was anticipation that stablecoins would diversify away from crypto trading and emerge as payment instruments in everyday transactions. That doesn’t seem to be happening at the speed people hoped for. Here’s what we know.
Bitcoin prices peaked at $125,000 on October 6, 2025. Four days later, on October 10, crypto markets experienced their largest deleveraging episode on record: more than $19 billion in leveraged positions were liquidated within 24 hours.
The volatility in cryptocurrencies is obvious. What is less clear is the fate of the medium of exchange in the crypto system: stablecoins. Before the crypto winter, stablecoins outstanding reached $300 billion with transaction volumes ranging between $600 million to $1 trillion per month on an adjusted basis. But what has happened to the market since October?
The chart on the left shows that growth of stablecoins outstanding stalled abruptly after October, breaking from its strong upward trajectory through 2024 and early 2025. Since October, stablecoins outstanding have contracted by roughly $125 million. Notably, December and January recorded two consecutive monthly declines – something that has not occurred since 2023.
The shrinking stablecoin market during the crypto winter suggests stablecoin demand remains highly sensitive to crypto market conditions rather than acting as a countercyclical safe asset within the ecosystem. Not only did investors sell bitcoin and other crypto assets, but some also off-ramped their stablecoins most likely for dollar bank deposits.
According to on-chain analytics from Visa, stablecoin transaction volumes surged in October. Adjusted volumes peaked at $1.46 trillion – an increase of $460 billion, or 46 percent, relative to September’s $1.02 trillion. If this activity had been driven primarily by real-world payment use cases, volumes would likely have decoupled from crypto market conditions. Instead, stablecoin transactions spiked precisely as crypto markets were crashing, pointing to trading and on-chain repositioning rather than everyday payments as the dominant force.
The crypto winter did not turn stablecoins into a haven where investors parked their wealth, nor did it reveal a stablecoin market decoupled from crypto. Instead, it showed how deeply stablecoin demand and usage remain intertwined with crypto market activity.
The Comptroller of the Currency issued a rulemaking notice around the GENIUS Act in February, so we are in the early days of implementing a legal framework for stablecoins. It’s too early to say they won’t someday be widely used as an instrument for daily retail and business transactions. It is also too soon to say investors universally recognize them as safe assets on par with traditional dollar assets, such as bank deposits.
