USDC circulation decreased by 1 billion tokens in 7 days: Redemption pressure or market adjustment

2026-01-01 07:05:53

Over the past week, USDC experienced a liquidity adjustment. According to official data, as of December 29, Circle issued approximately 4.6 billion USDC, but redeemed about 5.7 billion tokens, resulting in a net decrease of 1.1 billion in circulation. This is a noteworthy signal, but reserve data indicates that the market does not need to over-worry.

The Truth Behind the Decline in Circulation

Redemption pressure exceeds issuance

The key to this circulation decline lies in the redemption volume surpassing the issuance. Against the backdrop of year-end adjustments in the crypto market, institutions and large holders are choosing to cash out some USDC positions, which is a relatively normal risk management move. In comparison, the new issuance was only 4.6 billion, indicating that short-term demand for new USDC has decreased.

This phenomenon is not uncommon at year-end. Traditional financial markets also often see similar liquidity adjustments, especially before holidays.

Reserve adequacy remains reassuring

More importantly, the reserve status of USDC remains healthy. Official figures show:

Reserve Category	Amount	Percentage
Overnight reverse repurchase agreements	$51 billion	66.8%
Treasury bonds within 3 months	$14.6 billion	19.1%
Systemically important institution deposits	$10 billion	13.1%
Other bank deposits	$800 million	1.0%
Total Reserves	$76.3 billion	100%

Total reserves ($76.3 billion) are slightly higher than the total circulation (75.9 billion tokens), with a reserve coverage ratio of 100.5%. This indicates that USDC’s redemption capacity is not an issue, and the reserve structure remains relatively robust, primarily composed of U.S. Treasuries and overnight reverse repos, with manageable risk.

Comparison with Recent Minting Activity

An interesting aspect of this data is the timing difference. According to related reports, Circle minted another 1 billion USDC within 24 hours after December 31 (post-data release), and over the past 11 hours, a total of $2 billion in stablecoins have been minted jointly with Tether. This suggests:

After the short-term liquidity adjustment, market demand rebounded quickly
Circle’s intensive minting activity at year-end indicates increasing demand for stablecoins
This may be related to market expectations for funding in early 2026

Liquidity Signals in the Stablecoin Market

The change in USDC circulation reflects the liquidity characteristics typical of the crypto market at year-end. Although redemption pressure exists, the subsequent rapid minting indicates:

Confidence in USDC remains intact
Liquidity adjustments are temporary, not a trend reversal
Institutions are preparing for market activities in the new year

Looking at the reserve structure, Circle manages fund safety cautiously, with significant allocations to U.S. Treasuries and overnight reverse repos, which is a positive factor for the long-term stability of stablecoins.

Summary

The short-term decline in USDC circulation is a normal year-end liquidity adjustment, not a warning signal. Sufficient reserves, a healthy reserve structure, and subsequent minting rebounds all suggest that the stablecoin market is adapting to market cycle changes. For holders, the key is to continue monitoring reserve adequacy—currently at 103% coverage, indicating manageable risk. For market observers, this adjustment more reflects rational risk management by participants at year-end rather than systemic issues.

This page may contain third-party content, which is provided for information purposes only (not representations/warranties) and should not be considered as an endorsement of its views by Gate, nor as financial or professional advice. See Disclaimer for details.