Coin Metrics: USDC and USDT supply respond differently to crypto rallies
In brief
- Coin Metrics published research on Oct. 20 on drivers of USDC and USDT supply growth.
- Stronger crypto returns preceded slower USDC growth and faster USDT growth the following week.
- Higher funding rates were linked to faster supply growth for both USDC and USDT.
- No model explained more than 25% of weekly supply-growth movement.
- The study does not establish causation or test future Bitcoin returns.
What the study tested
The research used weekly observations over four years, testing six drivers from the previous week against subsequent supply growth. Funding rates showed up for both issuers. Higher perpetual-futures funding rates were associated with faster growth for USDC and USDT, accounting for about 10% of USDC's and 4% of USDT's weekly supply-growth variation after controls, per Coin Metrics.
Lending yields didn't behave the same way. The study found a lending-yield association specific to USDC. A separate analysis cited in the report, starting in 2023, used the gap between Aave v3's annual percentage yield and a three-month Treasury yield; that carry spread added significant explanatory information for USDC but no meaningful increment for USDT or combined supply beyond funding.
Most of the movement isn't explained
The lagged issuer models accounted for about 13% of USDC's weekly supply-growth changes and 16% of USDT's, according to the Coin Metrics research.
None of the models got past 25%.
That leaves most of the movement unexplained. It's also worth being clear about scope: the historical associations don't establish causation, and they don't test future Bitcoin returns.
The BTC 'dry powder' read
CryptoSlate wrote that the findings complicate treating combined USDC and USDT issuance as a single pool of cash waiting to buy BTC. A new dollar token can serve a borrower, a lender or someone staying in dollars before it reaches a Bitcoin trade, the outlet noted.
The issuers' own descriptions, cited by CryptoSlate, show that range. Circle describes USDC minting as a customer depositing dollars and receiving newly issued tokens (redemption takes tokens out of circulation). Tether describes uses that include payments and exiting market positions. On the defi side, Aave explains that supplied assets earn interest and can serve as collateral.
Exchange balances aren't a clean signal either. A CryptoSlate analysis on July 20 used stablecoin balances at Binance and Bybit to assess liquidity available for Bitcoin purchases, but the outlet stated that an exchange deposit is an intermediate step, not a completed purchase. Existing tokens can also move between holders without new issuance, which separates circulation growth from trading activity.
Frequently asked questions
Does stablecoin issuance signal fresh Bitcoin demand?
Not cleanly, according to CryptoSlate's reading of Coin Metrics research. USDC and USDT supply responded in opposite directions to prior crypto returns, and CryptoSlate wrote that this complicates treating combined issuance as a single pool of cash waiting to buy BTC.
How much of USDC and USDT supply growth did the Coin Metrics models explain?
The lagged issuer models accounted for about 13% of USDC's weekly supply-growth changes and 16% of USDT's. None of the study's models accounted for more than 25%, leaving most movement unexplained.
What role did funding rates play in the Coin Metrics study?
Higher perpetual-futures funding rates were associated with faster supply growth for both USDC and USDT. They accounted for about 10% of USDC's and 4% of USDT's weekly supply-growth variation after controls.
