TL;DR
- The supply of stablecoins on Avalanche grew by more than 70% in a year, but AVAX lost nearly 60% of its value during the same period.
- A large portion of stablecoin capital, mainly bridged USDT, remains inactive, limiting demand for AVAX.
- Macroeconomic uncertainty and U.S. trade negotiations have affected the crypto market’s bullish momentum.
The supply of stablecoins on Avalanche has increased by more than 70% over the past year, reaching $2.5 billion. However, this liquidity surge has not translated into higher demand for AVAX, the network’s native token, which has lost nearly 60% of its value over the same period. Despite the growth in stablecoin issuance, a significant portion of these funds is not being actively used in DeFi protocols within the ecosystem.
Analysts indicate that a considerable share of this capital consists of Tether (USDT) bridged to Avalanche, suggesting that investors are holding it inactive rather than using it for lending, exchanges, or other applications. The lack of usage limits AVAX demand, as many operations require the token for transaction fees or as collateral in decentralized finance platforms.
We've seen stablecoins on Avalanche surge nearly 70% since March 2024, rising from $1.5B to over $2.5B. pic.twitter.com/arvB0hZDPC
— Avalanche🔺 (@avax) March 30, 2025
Avalanche Faces Constraints Due to Investor Inactivity
The crypto market, in general, has been experiencing bearish trends and corrections, and Avalanche (AVAX) is no exception. This period has been marked by macroeconomic concerns and expectations of new U.S. trade policies. The imminent implementation of import tariffs has fueled investor caution, reducing bullish momentum in both traditional and crypto markets.
Low Confidence in a Quick Market Recovery
According to a Nansen report, there is a 70% probability that the market will bottom out before June, once negotiations over these trade measures are concluded. The outcome of these discussions could shape the behavior of risk assets in the coming months. Meanwhile, Bitcoin and major stock indices have yet to recover above their moving averages due to a lack of confidence in an imminent rebound.
An increase in stablecoin supply is often seen as a sign of growing interest in the crypto market, but in this case, it has not translated into greater activity within the Avalanche ecosystem. The lack of active deployment of these funds in decentralized applications suggests that investors prefer to hold liquidity rather than take on additional risks.
