Stablecoins make up 1% of the US M2 broad money supply, signal further crypto dollarization

The supply of stablecoins continues to grow, reaching 1% of the US broad money in circulation. While this side of crypto finance remains small in comparison, the trend of crypto dollarization continues. 

The supply of stablecoins reached 1% of the US M2 money supply, becoming a notable factor in personal finance. Stablecoins reached a supply of $226.9B, with a constant trend of expansion. Other estimation techniques place the supply at $227.58B in dollar value, taking into account temporary de-pegs or premiums. More conservative estimates count $223.1B in stablecoins, as part of real-world asset tokenization (RWA).

The leading USDT and USDC drive the trend of dollarization of the crypto market, where pricing and liquidity are still hinging on the US economy and influence. The structure of stablecoins is similar to that of M2 money, which includes cash on hand, checking and savings accounts, short-term savings tools and deposits. Stablecoins offer similar liquidity tools, and not all are immediately available for trading. 

The M2 money supply in the USA expanded again in the past few months, reaching over 21.6 trillion. Currently, the M2 supply sits close to the post-pandemic period of quantitative easing. The increased money supply itself was one of the drivers of crypto adoption, leaving excess liquidity for new asset types. 

Stablecoins are expected to keep their trend, with a prediction for a supply of $400B by the end of the year. The M2 money expanded by over 39% since the pandemic years, while stablecoins had a much more rapid growth. Since the bull market of 2021, stablecoin supply expanded 10 times. 

Stablecoin inflows followed general market enthusiasm, but also expanded based on niche ecosystems. One of the sources of growth was the inflow of stablecoins to Solana (SOL), as well as L2 chains on Ethereum. TRON was also a driver for wider stablecoin adoption, adding over 55B in supply. 

Stablecoins are also more rarely burned during the latest market cycle. Instead, after creation, stablecoins wait on the sidelines in the form of exchange reserves. USDT and USDC are widely used to rebuild leveraged positions or to wait for favourable trades.

Derivative exchanges take up stablecoin supply

Over $44B in stablecoin supply has flowed into derivative exchanges, bringing the supply near an all-time low. Spot exchanges see outflows of liquidity, as whales often deposit stablecoins just before buying. 

For leveraged traders, however, stablecoin deposits ensure the ability to rebuild positions and post the required margin for leveraged trades. The expansion of stablecoins adds to the effect of derivative trading on overall crypto performance. 

After the recent market drawdown, exchanges are back to receiving positive net inflows of stablecoins. Reserves expanded by another $291M as of March 12, following a period of significant net outflows. 

Tether remains the leading stablecoin issuer

Despite restrictions for US traders, USDT remains the leading stablecoin. In the past month, the supply of USDT expanded by $2.39B, despite the market downturn. USDC, the second-biggest stablecoin, expanded its supply to over 56B tokens, with the goal of surpassing Tether’s stablecoin. 

USDT reached a total supply of 143.14B tokens, with a daily turnover of over $61B in trading volumes. USDC has a much slower daily trading activity of only $13B. The token, however, aims to catch up due to its wider acceptance by financial regulators. 

USDC still managed to expand its share of the total stablecoin supply from 20% to around 25% since November 2024. However, the token slowed down its transfer volume in the past month, down by 28.36% after the slowdown of Solana DEX activity and token trading. 

At the same time, USDT increased its transfer volume by 15.47%, based on Artemis data.

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