Funding Rates and Carry Spreads Drive Stablecoin Supply Growth
TREE NEWS reports: New research from Coin Metrics reveals that perpetual futures funding rates and the carry spread between DeFi lending yields and traditional risk-free rates are statistically significant drivers of USDC and USDT supply growth. The study, which analyzed four years of weekly data, found that funding rates alone explain 13.3% of the variance in combined stablecoin supply changes.
Key Findings
- Perpetual funding rates are the strongest single predictor, explaining 10% of USDC’s weekly supply variance and 4% of USDT’s.
- The carry spread—Aave v3 stablecoin supply APY minus the 3-month T-bill rate—provides additional explanatory power for USDC, with funding rates and carry spread jointly explaining 15.9% of USDC supply variance.
- USDT expands during market rallies (risk-on), while USDC grows during downturns (risk-off), reflecting their distinct roles: USDT as trading collateral and USDC as a DeFi-native safe haven.
“The market leverage and yield-driven demand for stablecoins is clear,” said Cooper Duschang, author of the report. “But over 75% of supply changes remain unexplained by our models, highlighting the influence of idiosyncratic factors like issuer treasury operations and regulatory shifts.”
Industry Implications
For DeFi protocols, the findings underscore the importance of monitoring funding rates and lending yields as leading indicators of stablecoin inflows. When funding rates rise, traders mint stablecoins to post as margin, boosting supply. Similarly, when DeFi lending rates exceed T-bill yields, arbitrage capital flows on-chain, particularly into USDC.
“USDC’s sensitivity to the carry spread confirms its role as the core collateral of DeFi,” Duschang noted. “It’s a pure play on on-chain yield.”
Forward-Looking Perspective
As institutional adoption grows, stablecoin supply dynamics will increasingly reflect macro-financial factors. The study’s models, which incorporate variables like Fed net liquidity and the dollar index, provide a framework for anticipating supply shifts. However, the researchers caution that regime changes—such as the 2022 credit crisis or the 2025 institutional boom—can disrupt historical relationships.
With stablecoins now a $250 billion market, understanding their supply drivers is crucial for investors, traders, and policymakers. The Coin Metrics analysis offers a quantitative lens into a market that is both a barometer of crypto leverage and a bridge to traditional finance.
