Shrinking crypto market liquidity is a concerning sign for crypto asset valuations, as investors gravitate towards safe-haven assets like precious metals amid growing global trade uncertainty.
The stagnating stablecoin supply is presenting a “notable headwind” for Bitcoin (BTC) and the broader crypto ecosystem, according to Matrixport. “Stablecoins serve as the primary liquidity rail within digital assets and stagnation in supply often signals that capital is being off-ramped back into fiat rather than redeployed within crypto markets,” said the digital asset platform in a Tuesday X post.
The stablecoin supply has fallen by $5.6 billion year-to-date, from $159 billion on Jan. 1, to $153.4 billon on Tuesday, according to analytics platform CryptoQuant. Stablecoin reserves on the leading crypto exchange, Binance, also shrank by 19% since November 2025, Cointelegraph reported earlier on Tuesday.
Bitcoin no longer trading like “digital gold,” says CryptoQuant CEO
Bitcoin also appears to be decoupling from gold in the short term. BTC’s 90-day Pearson correlation with gold has turned negative, falling near -0.75, according to analytics platform CryptoQuant.
The Pearson correlation measures how closely the returns of Bitcoin and gold move together at a given period, with a -1 marking a perfect negative correlation.
“Bitcoin is in a ‘not digital gold’ period,” said Ki Young Yu, the founder and CEO of CryptoQuant, in a Tuesday X post.
Tariff uncertainty, precious metal rotation are thinning crypto liquidity: analyst
The backdrop has been complicated by renewed tariff uncertainty. On Saturday, US President Donald Trump announced a global tariff plan that has fueled uncertainty, with a 10% rate taking effect while an increase to 15% has been discussed.
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The renewed geopolitical concerns are accelerating the crypto capital exodus towards precious metals, according to crypto exchange Bitget’s chief analyst, Ryan Lee.
The tariff fears are limiting the upside of digital assets, which are now competing with other defensive and growth assets, the analyst told Cointelegraph, adding:
“The ongoing slide in Bitcoin and Ethereum reflects a broader risk-off macro backdrop, where tariff uncertainty, geopolitical tensions, and capital rotation into precious metals and AI-linked equities have thinned crypto liquidity and weakened narratives.”
Crypto market upside will remain limited until “recovery catalysts” such as clearer US policy or more “constructive” Federal Reserve signals emerge on interest rate cuts, added Lee.
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The precious metal rotation is also visible in the charts, as gold and silver rose 19% and 21% year-to-date, respectively, while Bitcoin’s price fell by 27%, according to TradingView.
Tokenized real-world-assets (RWAs) are also showing signs of a rotation towards safe-haven assets, as Tehter Gold’s (XAUT) value rose 20% to $2.7 billion during the past 30 days, while holders increased by 33%, data from RWA.xyz shows.
The tokenized commodities market surpassed $6 billion on Feb. 11, logging an 53% increase in less than six weeks, as more gold investment moved on the blockchain.
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