Despite Surging Stablecoin Supply, Avalanche Faces Utility Token Challenges Amid Passive Capital Use
Over the past year, Avalanche has experienced a remarkable 70% increase in its stablecoin supply—rising from $1.5 billion in March 2024 to over $2.5 billion as of March 31, 2025. While this typically signals growing investor interest and potential for market activity, the network’s native utility token, AVAX, has not mirrored this momentum.
Stablecoins often serve as an on-ramp for fiat liquidity entering the crypto space, with rising supply generally viewed as a bullish indicator. Yet, AVAX has struggled, losing nearly 60% of its value over the same period, now trading just above $19, according to Cointelegraph Markets Pro.
This divergence suggests that capital entering Avalanche may not be actively deployed. Juan Pellicer, senior research analyst at IntoTheBlock, highlighted that a significant share of this growth comprises bridged Tether (USDT), likely held in dormant treasuries rather than being utilized in DeFi protocols.
“If these stablecoins are sitting idle—rather than being lent, swapped, or used in yield-generating activities—they don’t generate the same demand for AVAX, which is needed for gas fees, collateral, and other utility,” Pellicer explained.
The underperformance of AVAX also reflects broader market dynamics. Cryptocurrency markets have been under pressure, with investor confidence shaken ahead of an impending announcement by U.S. President Donald Trump regarding new reciprocal import tariffs, aimed at addressing a $1.2 trillion trade deficit.
Despite the uncertainty, analysts at Nansen suggest there’s a 70% probability that the crypto market will bottom by June. “As negotiations progress and uncertainty clears, we anticipate a more favorable environment for risk assets like crypto,” said Aurelie Barthere, principal research analyst at Nansen.
For now, both traditional and digital markets continue to struggle, with major indices and Bitcoin failing to reclaim key technical levels such as the 200-day moving average, as noted in Nansen’s latest April 1 report.
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