Crypto’s primary liquidity gauge is flashing warning signs. According to a new market note from Matrixport, while total stablecoin supply remains near all-time highs, the pace of new capital inflows has peaked and is now slowing, considered a classic signal of buyer exhaustion.
The firm notes that the rolling 12-month growth rate of stablecoin issuance topped out in late October and has since rolled over. The deceleration coincides with a roughly 3% decline in Bitcoin, which was trading near $85,860 on Tuesday morning, struggling to reclaim key moving averages.
The Data: Liquidity Stock vs. Liquidity Flow
On the surface, crypto liquidity appears abundant. Tether (USDT) and Circle (USDC) together command a combined market capitalization exceeding $260 billion. However, Matrixport argues that headline supply figures obscure a more important signal: the marginal liquidity needed to sustain price momentum is drying up.
The firm attributes the slowdown primarily to the Federal Reserve’s shift toward a more cautious stance on future rate cuts.
“Political constraints may have a greater impact on market flows than investors’ perceptions,” Matrixport wrote, adding that liquidity conditions remain constrained by weak retail participation.
Why Stablecoin Supply Is No Longer Driving Risk Appetite
Matrixport highlights a critical divergence shaping current market dynamics:
Liquidity Stock: Absolute stablecoin supply continues to rise, theoretically providing ample “dry powder.” Liquidity Impulse: The velocity of that capital has collapsed. Instead of rotating into risk assets, funds are remaining idle or moving into yield-bearing instruments.The firm links this behavior to growing uncertainty around the Fed’s policy path, as reinforced by recent FOMC minutes that offered little clarity on the timing or depth of easing.
Market Reaction: Technical Damage Builds
Price action has turned defensive. Matrixport notes that Bitcoin has lost its “bull market trend indicator” for the first time in several months, signaling weakening momentum beneath the surface.
With the Fed unlikely to deliver aggressive easing in Q1, the firm warns that the “correction phase forecast since October” is likely to persist unless a new macro or liquidity catalyst emerges.
Institutional View: Velocity Matters More Than Size
Matrixport emphasizes that the key distinction separating institutional positioning from retail narratives is the difference between liquidity stock and liquidity impulse.
A $260 billion stablecoin float may sound bullish, but without an accelerating rate of issuance and deployment, it acts more like a reservoir than a flood. Institutional desks are interpreting the Fed’s hesitation as a cap on leverage and risk-taking.
Until the cost of capital meaningfully declines or stablecoin issuance re-accelerates on a rolling basis, Matrixport expects choppy, range-bound conditions rather than sustained breakouts.
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