A disagreement arose over Ethereum [ETH]where stablecoin liquidity remained present, but network activity declined during Bitcoin’s period [BTC] consolidation phase.
At the time of writing, Tether [USDT] Active addresses fell to 202,300, while USD Coin [USDC] fell to 109,300, the lowest level since mid-December. Meanwhile, this decline reflected reduced demand for transactions on Ethereum as users owned stablecoins without staking them.
This behavior indicates caution, with capital remaining idle despite being available, consistent with a long-term bandwidth-bound structure below $75,000. However, as Bitcoin gradually approaches this level, conditions begin to change.
If momentum strengthens, Ethereum activity may recover, allowing sidelined liquidity to come back in, increasing volatility; otherwise, continued inactivity could increase consolidation across the market.
Ethereum usage is growing despite the slowdown in activity
However, a deeper structural layer began to emerge on Ethereum, where long-term usage trends were in stark contrast to the recent decline in activity.
While current engagement declined, quarterly stablecoin transfer volume continued to rise and has now surpassed the $8.5 trillion mark, reflecting continued demand for settlements.
Previous cycles showed almost negligible volume in the 2018-2019 period; however, activity accelerated rapidly starting in 2020, crossing the $2 trillion mark in 2021. As adoption increased, periodic slowdowns appeared, but the broader trajectory remained upward, signaling structural growth beyond the short-term decline in participation.
More recently, volume increased from around $3 trillion to over $8 trillion, indicating an increasing reliance on Ethereum for large-scale transfers. This difference suggests that while retail activity is slowing, underlying network utility remains strong, leaving room for reactivation as market conditions improve.
Compression and reactivation risk of stable coins
Stablecoin’s liquidity has been quietly strained as supply reached $319.5 billion with a modest weekly growth of +0.65% at the time of writing, due to the restrained issuance. At the same time, the +1.13% monthly expansion indicated limited capital inflows despite a $2.5 to $2.7 trillion market.
Meanwhile, stablecoins accounted for almost 75% of trading volume, but the velocity and inflows of currency remain subdued, indicating an idle stake. While this continued, Bitcoin’s dominance remained at almost 59%, indicating limited participation and weak altcoin rotation.
At the same time, 30-day realized volatility fell below 40%, reinforcing a controlled market environment. This design is important because incremental flows now have a greater impact.
If activity increases as Bitcoin strengthens, expansion may follow; Otherwise, the rally risks remaining narrow, with limited breadth and weaker conviction.
All in all, Bitcoin’s strength could reactivate stablecoin liquidity and broaden participation, while its inability to raise capital could keep markets compressed, limiting volatility and upside pass-through.
Final summary
- Ethereum is showing strong settlement growth of nearly $8.5 trillion per quarter, but declining USDT and USDC activity indicates inactive liquidity.
- Bitcoin’s strength could lead to stablecoin reactivation and broader participation, while weak engagement risks prolonging a limited consolidation phase with little conviction.