Key Takeaways → USDT off-ramping again, proceeds kept in USD → Third straight report of heavy USDT exits → USDT and USDC supply fell $2.12 billion combined → Circle’s Q2 reserve return: 3.48%
→ USDT off-ramping again, proceeds kept in USD
→ Third straight report of heavy USDT exits
→ USDT and USDC supply fell $2.12 billion combined
→ Circle’s Q2 reserve return: 3.48%, kept by issuer
Zerocap is a Melbourne-based digital asset firm that provides trading, liquidity and custody to institutions and wholesale investors, and is registered with Australia’s financial intelligence agency, AUSTRAC, as a digital currency exchange. Its OTC trader Oliver Davis wrote that USDT saw “another pronounced off-ramping week as risk appetite deteriorated,” with the proceeds going almost one-for-one into dollars that clients kept. The weaker mood came from a sell-off in technology shares, which pulled other risk assets down with them.
According to its October 26 weekly market wrap, clients barely touched crypto itself. Bitcoin and Ether traded in small sizes with no clear direction, Solana and XRP drew only isolated interest, and stablecoins and foreign exchange made up most of the desk’s volume. On the FX side, US dollars were significantly net bought, while AUDD, an Australian dollar stablecoin, was again significantly net sold. Every signal on the desk pointed toward dollars.
Read across, the reports show a shift. Earlier in October, clients leaving USDT were still moving into USDC, and the October 20 report said they were using AUDD as a local route into dollar stablecoins. That was also the week the European Banking Authority classified USDC as the first “significant” e-money token under the EU’s MiCA rules, placing its reserves and liquidity under the regulator’s direct oversight. By the latest week, the USDC buying had faded to balance and the proceeds went into plain dollars. Clients moved from switching between stablecoins to stepping out of them.
Stablecoins are usually where crypto capital waits. A Kansas City Fed briefing estimated that 48.8% of stablecoins are held as trading assets, including capital parked between trades, against just 0.7% used for payments. Zerocap’s clients did not park their capital there this time. They took it out of crypto’s rails altogether.
Zerocap gives no sizes, so its desk cannot show what the whole market did. DeFiLlama’s supply data, checked on October 26 at 12:17 UTC, points the same way.
USDT supply
$182.32B
−$1.11B (−0.61%) in seven days
USDC supply
$71.57B
−$1.01B (−1.39%) in seven days
Together, the two largest dollar stablecoins lost $2.12 billion of supply in a week. USDC’s percentage drop was more than double USDT’s, even though Zerocap’s own USDC flows were balanced, so the market-wide picture is not a USDT-only story. The two measures are also different: when a desk passes a client’s USDT to another buyer, the tokens stay in circulation, and supply only falls when issuers redeem them. Desk flows and supply data are separate signals pointing the same way.
Every dollar behind a stablecoin earns interest, but the issuer keeps it. Circle, which issues USDC, reported a reserve return rate of 3.48% in the second quarter of 2026, and reserve income made up about 95% of its revenue. In the US, the GENIUS Act bars payment stablecoin issuers from paying holders interest simply for holding the coin.
The cost of waiting, illustrated
At Circle’s 3.48% reserve return, $1 million in stablecoins earns its issuer about $34,800 a year. A holder who waits in the token instead of in cash gives that up, unless a platform shares it.
That gap matters more when rates stay high. Zerocap’s desk expects the Federal Reserve to hold its policy rate in the 3.75% to 4.00% range at this week’s meeting. A BIS working paper by Rashad Ahmed and Iñaki Aldasoro, using weekly US data from January 2019 to June 2025, found that higher bank deposit rates predicted slower stablecoin growth, with a stronger link for USDC than USDT, in line with the argument that deposit rates can compete with stablecoin balances. Zerocap does not say whether its clients’ dollars earn interest, or why they chose cash, beyond the weaker risk appetite.
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The firm points to this week’s Fed decision on Wednesday and earnings from Alphabet, Microsoft and Amazon as the next tests for risk appetite. Until then, its strategist Emir Ibrahim argued that for crypto holders it is “a better moment to look at protective structures than to sell outright,” and the desk is offering principal-protected notes with 85% capital protection and 103% upside participation.
If the money returns, the first sign should appear on desks like Zerocap’s, as dollars flow back into stablecoins before anything else. For now, its clients have chosen cash.
This article is provided for informational purposes only and does not constitute financial or investment advice.
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