Track aggregate USDT/USDC/DAI circulating supply and classify on-chain dollar liquidity as expanding, stable, or contracting
Tells you whether dollar liquidity on-chain is expanding or draining, a proxy for crypto risk appetite. It reads total circulating supply and 7-day supply change across major stablecoins, plus any recent depeg events. It classifies the regime as expansion, stable, or contraction and returns a 0-100 score, flagging any stablecoin whose supply contracts more than 5% as a watch. This tracks aggregate supply, not a per-chain breakdown.
Aggregate stablecoin supply as a liquidity measure - and a widespread misreading of it that is worth learning to avoid.
THE ANALOGY BEING DRAWN is to monetary aggregates: in traditional macro the quantity of money bears on asset prices, and stablecoins are the closest on-chain equivalent to a dollar balance.
WHAT MOVES AGGREGATE SUPPLY, and this is the crux. Aggregate supply rises through net ISSUANCE and falls through net BURNING or redemption. It does not move when holders trade. If you sell a token for stablecoins, those stablecoins already existed and simply changed hands; aggregate supply is unchanged. The same is true in reverse when you buy.
WHY THAT MATTERS: it invalidates the most common reading of this metric. 'Rising stablecoin supply means dry powder waiting to buy' and 'falling supply means capital has been deployed into assets' are both wrong, because secondary-market rotation between cryptoassets and already-issued stablecoins does not change the aggregate at all. What the aggregate actually measures is ISSUANCE AND REDEMPTION CONDITIONS - whether dollars are being converted into on-chain claims and back - not whether holders are currently positioned in risk assets. That correction is the single most valuable thing in this entry.
WHAT IT DOES SUPPORT. Sustained net issuance of redeemable fiat-backed stablecoins generally increases on-chain dollar claims. Even that is not proof of net external capital arriving: it can reflect issuer substitution, migration between chains, credit creation, or minting that is not fiat-backed. And redemption responds to yield - when short-dated Treasury yields are high, holding a non-yielding stablecoin has a real opportunity cost and supply can shrink for reasons unrelated to crypto risk appetite.
A MEASUREMENT NOTE. This reads an aggregator's reported circulating-supply field rather than reconciling issuer mint, burn and treasury addresses directly. Supply can also change through rebasing, algorithmic issuance, liquidations, classification changes or data revisions, so the interpretation differs for algorithmic and rebasing assets from conventional fiat-backed ones.
DEPEG EVENTS - a stablecoin trading away from its reference dollar - measure the market's assessment of that ISSUER's redemption credibility and the depth of its liquidity. Important information, and about the issuer rather than about risk appetite.
The expansion/stable/contraction bands, the 0-100 score and the 5% watch threshold are our own convention. This tracks aggregate supply and not a per-chain breakdown.
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