Stablecoin Supply Increase Reaches 1% of U.S. M2 Money Supply

# Stablecoin Supply Surges to 1% of U.S. M2, Amounting to $226.9 Billion Supply of stablecoins has steadily increased, reaching 1% of the broader U.S. money supply (M2), according to CryptoPolitan on October 12. While the crypto dollarization phenomenon persists, the sector remains relatively small in the realm of crypto finance. The aggregate stablecoin supply stands at $226.9 billion, with some estimates putting the figure at a slightly higher $227.58 billion. Conservative estimates round this figure to $223.1 billion, indicating its role in the tokenization of real assets. Major stablecoins like Tether (USDT) and USD Coin (USDC) are at the forefront of the dollarization trend in the cryptocurrency market. Similar to M2 currency—which includes cash, deposits, and short-term savings instruments—stablecoins serve as liquidity tools, though not all are instantly tradable. The U.S. M2 money supply has resumed its upward trajectory over recent months, surpassing $21.6 trillion, nearing levels observed during the quantitative easing period post-pandemic. This surge in money supply has been a driving force behind the adoption of cryptocurrencies, providing liquidity to a novel asset class. # Stablecoin Supply Expected to Hit $400 Billion by Year-End The stablecoin supply is forecasted to reach $400 billion by the end of the year. Since the pandemic, the M2 money supply has grown by over 39%, but stablecoins have expanded at an even faster rate. During the 2021 bull market, the stablecoin supply increased more than tenfold. The influx of stablecoins has fueled overall market fervor and contributed to the growth of specific ecosystems. Key drivers include inflows into Solana (SOL), Ethereum Layer 2 chains, and a supply increase of over $55 billion on TRON. In the current market cycle, stablecoin burn events are infrequent, with most reserves held in anticipation of favorable trading opportunities. USDT and USDC are extensively used to rebuild leverage positions or await advantageous trades. # Derivatives Exchanges Absorbing Stablecoin Supply Over $44 billion in stablecoins have flowed into derivatives exchanges, reducing the circulating supply to near-record lows. While spot exchanges experience liquidity outflows, whale investors typically deposit stablecoins just before making large trades. For leverage traders, depositing stablecoins ensures they can rebuild positions and meet margin requirements. Following the recent market downturn, exchanges have again recorded net inflows of stablecoins. As of March 12, reserves increased by $291 million, reflecting a positive trend. # Tether Maintains Dominance as Leading Stablecoin Issuer Despite trading restrictions in the U.S., Tether (USDT) remains the leading stablecoin issuer. Last month, USDT supply increased by $2.39 billion, continuing its expansion despite market declines. USD Coin (USDC) has also increased its supply to over 56 billion tokens, striving to surpass Tether. USDT boasts a total supply of 143.14 billion tokens with a daily trading volume exceeding $61 billion. In contrast, USDC's daily trading volume stands at $13 billion, yet it has gained traction through broad acceptance by financial regulators. Since November last year, USDC has expanded its market share of the overall stablecoin supply from 20% to 25%. However, a 28.36% decrease in Solana DEX activity led to a reduction in transfer volume over the past month. Conversely, USDT’s transfer volume increased by 15.47% during the same period.