- A Coin Metrics study published Oct. 20 finds that USDC and USDT supply responds differently to crypto-market conditions, so the two cannot be treated as one pool of Bitcoin-bound cash.
- Higher perpetual-futures funding rates are associated with faster supply growth for both tokens, but lending yields show a link specific to USDC.
- None of the study’s models explains more than 25% of weekly supply movement, and the researchers do not claim that issuance proves Bitcoin buying.
New research from Coin Metrics suggests that the combined supply of USDC and USDT can expand to serve several different kinds of demand. For Bitcoin investors, that finding weakens the idea that rising stablecoin issuance is a straightforward signal of cash waiting to enter the market. The study’s results point to a more layered picture in which the destination of newly issued tokens matters as much as the total.
What Happened
Coin Metrics published its research on Oct. 20. The analysis uses weekly observations spanning four years and tests six drivers from the prior week against subsequent supply growth for each issuer. The researchers found that stronger returns in the broader non-stablecoin crypto market were associated with slower USDC growth the following week, while the same conditions were associated with faster USDT growth.
Funding rates on perpetual futures showed a positive association with supply growth for both tokens. After controls, that variable accounted for about 10% of the weekly variation in USDC supply growth and about 4% for USDT.
A separate analysis beginning in 2023 examined the spread between the annual percentage yield on Aave v3 lending and the three-month Treasury yield. This “carry spread” added meaningful explanatory power for USDC. For USDT, and for combined supply beyond what funding already captured, the study found no meaningful additional contribution.
Taken together, the lagged issuer models explained roughly 13% of the weekly fluctuations in USDC supply growth and 16% for USDT. No model in the study accounted for more than 25% of the movement. The researchers describe these as historical associations, not proof of cause and effect, and the study does not test future Bitcoin returns.
Why It Matters
The central takeaway is that the two largest dollar stablecoins do not respond to market conditions in the same way. A positive link for one issuer alongside a negative link for the other can exist within the same aggregate figure. Analysts who read total stablecoin supply as a single measure of buying power may therefore be combining signals that point in different directions.
The study also highlights the role of collateral and lending demand. A trader who needs dollar-denominated collateral and an investor who simply wants to hold dollars can both create demand for stablecoins. Identical growth in supply can reflect very different intentions, which makes the aggregate number a limited guide to near-term Bitcoin demand.
For readers, the practical implication is caution. Rising issuance is a data point to examine, not a conclusion to act on. Understanding which token is growing, and what its holders are doing with it, provides a more complete view than the headline total.
Market Context
Stablecoins are designed to hold a stable value against the U.S. dollar, and they are widely used for trading, payments and as a store of value within crypto markets. Circle describes USDC issuance as beginning when a customer deposits dollars and receives newly minted tokens, while redemption removes tokens from circulation. Tether has described similar uses, including payments and moving out of market positions.
Newly issued tokens can end up in several places. They may be used to buy crypto assets, held by investors who are reducing risk, supplied to lending markets, or moved between holders without any new issuance at all. Aave explains that supplied assets enter liquidity pools, earn interest and can be used as collateral. Each of these paths leads to a different economic outcome.
Exchange balances offer another angle. CryptoSlate’s July 20 analysis used stablecoin balances held at Binance and Bybit to gauge liquidity that could be deployed into Bitcoin purchases. Such balances sit closer to trading activity than total circulation does, yet a deposit on an exchange is still an intermediate step rather than a completed trade.
The study also compared yield figures. Aavescan’s Ethereum v3 dashboards showed a USDC supply APR of 11.5% and a USDT supply APR of 3.1% at midnight UTC on Oct. 19. Over the same date, the three-month Treasury constant maturity rate recorded 4.27%, according to FRED’s DGS3MO series. These figures are point-in-time quotes and use different bases, so they do not provide a precise like-for-like comparison. Aave’s documentation also notes smart-contract, oracle, collateral and network risks that a yield comparison does not capture.
What to Watch Next
Readers should monitor how stablecoin supply is distributed between USDC and USDT rather than relying on combined totals. Changes in perpetual-futures funding rates and lending yields, particularly on platforms such as Aave, may offer clues about which uses are driving issuance at a given time.
Exchange-level balances deserve attention as well, but they should be interpreted as potential liquidity rather than confirmed purchases. Tracking redemptions, transfers between holders and changes in on-chain activity can help separate genuine capital inflows from routine movement.
Finally, the study itself is a reminder that its models leave most short-term supply movement unexplained. Future research that tests forward-looking relationships with Bitcoin returns would help clarify how much weight stablecoin data can carry in market analysis.
Source: original report