Stablecoins remain a cornerstone of the digital asset ecosystem, and Tether (USDT) continues to dominate with a market capitalization that has surged past $83.2 billion as of June 3, 2025—approaching its all-time high from May 2022. While rising USDT supply is often seen as a bullish signal, this time the broader crypto market, including Bitcoin (BTC), remains in a consolidation phase without significant price momentum.
This divergence raises a critical question: Where is the newly issued USDT actually going? Is it fueling trading activity, locking into DeFi protocols, or being held in reserve? A deeper analysis of on-chain and exchange data reveals a shifting landscape within USDT’s ecosystem—particularly between its TRC-20 and ERC-20 variants.
USDT Dominates Stablecoin Market with $83.2 Billion Valuation
As of June 3, the total stablecoin market cap stood at approximately $129.16 billion**, reflecting a slight 0.87% monthly decline and a 6.22% drop year-to-date. Despite this overall contraction, **USDT has defied the trend**, growing its market cap by **25.63% since the start of 2025** to reach **$83.21 billion, accounting for 64.4% of the total stablecoin market.
In contrast, USDC sits at around $28.77 billion, roughly one-third of USDT’s valuation, and has yet to recover fully from the liquidity challenges it faced earlier in the year. Other stablecoins like BUSD, DAI, and FRAX, while notable, operate at significantly smaller scales.
TRC-20 USDT Surges Ahead of ERC-20
USDT operates across multiple blockchains, but two variants dominate: TRC-20 (Tron) and ERC-20 (Ethereum). Together, they represent over 97.6% of all issued USDT.
- TRC-20 USDT: Issued supply ≈ $449.62 billion
- ERC-20 USDT: Issued supply ≈ $361.99 billion
Since early 2025:
- TRC-20 USDT market cap grew 34.90%, from $317.17 billion to $427.90 billion.
- ERC-20 USDT rose more modestly by 19.23%, from $279.96 billion to $333.80 billion.
This marks an accelerating shift in dominance toward Tron-based USDT, a trend that began gaining momentum after October 2022. The growing preference for TRC-20 suggests changing user behavior—driven by lower transaction fees and faster settlement times on the Tron network.
On-Chain Activity: TRC-20 Thrives While ERC-20 Stalls
On-chain transaction volume offers insight into how actively each USDT variant is being used.
- TRC-20 USDT: Daily on-chain transaction volume surged by 71.76% in 2025, rising from ~$41.42 million to ~$71.14 million per day. Its average daily volume now stands at $93.70 billion.
- ERC-20 USDT: Volume remained nearly flat, declining slightly by 0.25%, with an average daily volume of $44.64 billion.
Combined, these two variants process an average of $69.17 billion in daily on-chain transactions—yet the growth is almost entirely driven by TRC-20 activity.
This divergence highlights a structural change: users are increasingly favoring cost-efficient networks for everyday transfers and speculative flows, even if they’re not directly trading into volatile assets.
Exchange Reserves Rise, But Trading Volume Falls
One of the most puzzling findings is the disconnect between exchange holdings and actual trading activity.
As of June 3:
- ERC-20 USDT reserves on centralized exchanges reached $92.90 billion, the highest level this year—an increase of 34.62% from the annual low.
Yet, daily trading volume involving ERC-20 USDT has sharply declined:
- Monthly average in June: $367 million
- Down 11.35% from May
- Down 22.47% from April
- A staggering 51.05% drop observed in April following broader stablecoin liquidity concerns
This indicates that while more USDT is being deposited onto exchanges, it isn’t being used for active trading. Instead, it may be held as reserve liquidity or parked in anticipation of future opportunities.
DeFi Integration Lags Behind Historical Levels
Despite rising supply, USDT adoption in decentralized finance (DeFi) remains below previous peaks.
Currently:
- Only 15.03% of circulating ERC-20 USDT is locked in smart contracts—down from ~20% during similar market cap levels in May 2022.
- This suggests weaker integration into lending, borrowing, and yield-generating protocols compared to past cycles.
However, growth is visible in select platforms:
- On Ethereum: Uniswap V3 saw a 31.13% increase in USDT liquidity over the past month.
- On Tron: JustMoney reported a 46.30% monthly rise and 60.51% year-to-date growth in USDT deposits.
While these gains are promising, they reflect concentration in top-tier protocols rather than broad-based expansion across DeFi.
👉 See how DeFi analytics tools can help identify early trends in stablecoin utilization across chains.
Declining User Engagement Despite Market Cap Growth
Perhaps the most telling sign of subdued demand is the drop in user activity.
The number of daily unique active addresses for ERC-20 USDT currently stands at around 56,800, well below:
- The 2025 daily average of 87,000
- The peak of 149,900 observed earlier in the year
This downward trend suggests fewer users are actively transacting with USDT—even as its supply expands.
Meanwhile, BTC’s price has stabilized in a sideways range with reduced volatility, indicating market caution. Although BTC active addresses have held steady with a minor rebound in May, there’s no strong signal of renewed speculative interest.
Frequently Asked Questions (FAQ)
Why is USDT’s market cap rising if crypto prices aren’t increasing?
A growing USDT supply often signals incoming liquidity, but price movement depends on how that liquidity is used. If funds are parked on exchanges or held passively instead of entering trading or investment channels, price impact may be delayed or muted.
What does the rise of TRC-20 USDT mean for the market?
The surge in TRC-20 usage reflects demand for low-cost, fast transactions—common in emerging markets and peer-to-peer trading ecosystems. It also suggests diversification away from Ethereum due to high gas fees, potentially reshaping where stablecoin-driven activity occurs.
Is declining DeFi TVL for USDT a bearish sign?
Partially. Lower lock-up ratios suggest reduced yield-seeking behavior or risk aversion. However, growth in specific protocols shows niche strength. The overall picture points to cautious capital deployment rather than full retreat.
Where might new USDT be flowing if not into trading or DeFi?
Possible destinations include:
- Off-exchange peer-to-peer transactions
- Cross-border remittances
- OTC desks
- Pre-funding for future asset purchases
TRC-20’s growth hints at real-world usage beyond speculative trading.
Does higher exchange reserve always lead to higher volatility?
Not necessarily. High reserves can precede large sell-offs or buying pressure. Context matters—monitor order book depth and withdrawal trends to interpret intent behind holdings.
Could this pattern precede a bull run?
Historically, stablecoin supply growth has preceded rallies. However, timing varies. With user activity down and sentiment neutral, any breakout likely requires stronger catalysts—such as macroeconomic shifts or regulatory clarity.
Conclusion: Structural Shifts Over Speculative Surge
The current rise in USDT’s market cap isn't driven by widespread retail participation or explosive trading volume—it's marked by a quiet redistribution of capital across chains and storage layers.
Key takeaways:
- TRC-20 USDT is outpacing ERC-20 in both issuance and usage
- Exchange holdings are rising, but trading activity is shrinking
- DeFi integration remains below historical norms
- User engagement metrics are declining
These patterns suggest that while liquidity is expanding, it’s being held in reserve rather than deployed aggressively. The growing dominance of Tron-based transfers also signals evolving infrastructure preferences within the global crypto economy.
For investors and analysts, this phase underscores the importance of looking beyond headline market cap figures. Real insights lie in chain-specific flows, address activity, and behavioral shifts—indicators that reveal not just how much money is moving, but where and why.