Stablecoin liquidity returns! Is AI driving a long-term L1 divergence?

Strong stablecoin flows don’t always signal long-term market rotation.

At first glance, on-chain liquidity moving back in can look bullish. However, more often than not it reflects short-term rotation as investors chase speculative gains and try to profit from volatility rather than driving a sustained trend.

Notably, a recent report from CryptoQuant seemed to reinforce this view. The metrics showed that both USDT and USDC supply have been rising, indicating that demand is catching up. This suggested that investors may be gradually moving into risk assets, possibly as a hedge against macro FUD.

It must be noted, however, that the strength of this inflow is still relatively weak. 

Looking at the chart, the ratio of the last 30 days of inflows compared to the 1-year average revealed that capital entering the market has been fairly muted so far. In other words, while stablecoin inflows may be picking up, they’re not yet strong enough to signal a full market rotation.

This backs up AMBCrypto’s thesis. Just because liquidity is moving back doesn’t mean a long-term rally is guaranteed, unless inflows are strong enough to show that investors are seriously positioning around risk assets.

That said, looking at how some stablecoins have grown over time, the long-term picture is starting to look more encouraging. In fact, with one key divergence still in play, this growth looks set to keep expanding, potentially supporting a more sustained market trend.

Ethereum AI meets stablecoins creating a divergence for L1 momentum

Liquidity is returning. Not just at the macro level, but across L1s as well.

For instance, The Kobeissi Letter highlighted that stablecoin launches have increased noticeably over the past few months, led by names like WesternUnion’s USDPT, Fidelity’s FIDD, and Jupiter’s JUPUSD.

At the same time, Ethena’s [ENA] native stablecoin USDe holders have nearly doubled since the start of last year, getting close to 200k holders – A sign that adoption is steadily growing across networks.

On top of that, Bernstein has boosted Circle’s [USDC] price target by a massive 70% to $119, fueled by the growing AI narrative. Strong liquidity flows let AI agents process transactions faster and detect market trends, giving USDC an edge in the stablecoin space.

According to AMBCrypto, the recent wave of stablecoin launches shows networks are leaning into this emerging sector. This divergence is helping bridge short-term rotation and longer-term trends, signaling that capital is moving with strategy, rather than speculation.

As a result, these flows could push more long-term capital into risk assets. Over time, the trend could power a long-term L1 rally, even in a risk-off market, as AI adoption continues to deepen across the ecosystem.

Etéreo Final Summary

• Stablecoin flows are returning across L1s, supporting short-term rotations, with adoption rising for USDT, USDC. 
• AI-driven momentum is amplifying impact, positioning stablecoins to fuel a potential long-term L1 rally.