According to CoinDesk data, the stablecoin market experienced a significant contraction in June 2026, shedding $7.7 billion in market capitalization. This marks the largest monthly decline since the Terra-Luna collapse in 2022, bringing the total stablecoin market cap down to approximately $312 billion, roughly 3% less than its peak in May.

Despite this shrinkage in supply, on-chain transaction activity soared. Visa’s Allium dashboard recorded a record $1.79 trillion in adjusted transaction volume for June, a 63% increase from May and 125% higher year-over-year. USDC processed $1.21 trillion of this volume, even though its circulating supply is less than half that of USDT, which handled around $576 billion.

The supply of the two major stablecoins shifted modestly. Tether's USDT supply dropped from about $190 billion in May to $184 billion in June. Circle’s USDC also decreased from a March peak near $80 billion to roughly $74 billion. Both tokens held close to their $1 pegs throughout.

Analysts point out that this decline does not resemble the dramatic fallout of the 2022 Terra crisis, which erased nearly $34 billion in one quarter and involved a major depeg. The recent drop is smaller in scale and did not trigger any peg instability.

Data from Standard Chartered reveals that stablecoin turnover rates have nearly doubled compared to two years ago, running at about six times per month. This means a smaller stablecoin supply is circulating faster, explaining why transaction volumes can climb even as overall market cap falls. Visa’s figures show a stablecoin velocity of 13.56 per quarter, compared to just 1.65 for US M1 money supply, highlighting just how actively stablecoin dollars are being used.

Part of the capital that exited stablecoins appears to have migrated into tokenized Treasury funds, which provide a yield contrary to standard payment stablecoins. This shift aligns with regulatory changes like the GENIUS Act, enacted in July 2025, which prohibits payment stablecoins from offering yield, making idle stablecoin balances less attractive.

Tokenized Treasury assets grew to nearly $16 billion by late July. For example, Circle’s USYC fund approached $3 billion and BlackRock’s BUIDL fund neared $2.64 billion. the market for tokenized assets increased 1.75% to $30.1 billion in June, despite the falling stablecoin supply.

Market reaction was mixed amid these trends, with stablecoin prices maintaining their usual pegs while volumes surged sharply.