The crypto market is experiencing a liquidity crisis as the supply of stablecoins has dropped by 26% since April, according to a report by Santiment, a market intelligence platform, and echoed by Checkmate, an account on the X platform. This downward trend in liquidity is causing concerns as trading volumes remain low, and volatility remains compressed.

Notably, even stablecoins are being affected by this contraction, which is a shift in market dynamics. In particular, the total supply of stablecoins has decreased by $43 billion since April 2022, representing a 26% drop from the peak observed in March. In addition to the sentiment surrounding the cryptocurrency market, the community should also consider the appeal of interest rates in traditional markets, which stablecoins typically do not provide.

However, it’s important to note that not all stablecoins face the situation. Per Santiment, Tether (USDT) is defying the trend by experiencing a $13.3 billion expansion since November 2022. As a result, its market dominance has surged to 69%, which is remarkable considering it was at a low of 44% three months ago. On the other hand, USDC and BUSD have seen a decline in their supplies, possibly reflecting a shift among U.S. institutions towards higher yield environments.

Furthermore, Bitcoin and Ethereum have also witnessed developments. Both experienced an influx of capital this year, with their Realized Caps increasing to $6.8 billion and $4.8 billion monthly. However, this positive trend has halted since August, indicating a downturn in the market.

The balance between buying and selling pressures also indicates that the market is in a state of uncertainty. While 2021 was characterized by selling pressure during the bull cycle, things have stabilized. Consequently, market sentiment has shifted from profit-taking to one marked by apathy and uncertainty.