Stablecoins function more like a fragmented foreign-exchange market than a single, unified dollar asset: liquidity is dispersed across blockchains, issuers and pools, producing price dispersion and uneven access to dollar liquidity.
Moving stablecoins can appear straightforward, but under the surface it’s often a multi-step process routed across chains and pools. “It’s a very special case of a foreign exchange market onchain, and that leads to bad user experience, with unexpected slippage, transaction reversion and unfamiliar information when moving your dollar from point A to point B,” Ryne Saxe, CEO of stablecoin infrastructure firm Eco, told Cointelegraph.
The stablecoin market has grown above $320 billion in market capitalization, led by Tether’s USDT and Circle’s USDC. Yet as institutions and large traders enter, moving large sums becomes harder to execute cleanly.
Stablecoins aren’t as fungible as they look
A stablecoin may be pegged to the dollar (or other fiat), but it does not trade as a single, fungible asset. Liquidity is split among issuers, blockchains and decentralized venues, each with distinct depth, pricing and access rules. “Stablecoins, between them, aren’t very fungible,” Saxe said. The differing market profiles mean pricing and moving stablecoins efficiently across venues is harder than many assume.
In practice, a dollar-backed token on one chain can behave differently than the same token on another chain. Variations in collateral, market access and liquidity depth can create pricing gaps that widen with trade size or in thinner markets. These differences are often trivial for small trades in liquid markets, but they grow with scale.
“The more major DeFi markets focus on stablecoins, the more chains focus on stablecoins, the more stablecoin assets there are, the more fragmented,” Saxe said. “People think these are just dollars, but they’re actually not.”
A March report from payments startup Borderless found that pricing divergence largely depends on where liquidity is sourced. The study sampled hourly buy and sell rates across 66 stablecoin-to-fiat corridors covering 33 currencies and seven blockchains and showed USDC and USDT trade nearly identically in most corridors. But larger differences appeared at the provider level, with price gaps for the same corridor sometimes exceeding hundreds of basis points, making execution quality highly dependent on access and routing.
Stablecoins get harder to move at size
Stablecoins’ market structure resembles foreign exchange, where dollar proxies circulate across disconnected pools — a dynamic that becomes salient when moving large amounts across chains. They’re now central to institutions entering digital assets for trading, cross-border payments and onchain treasury tasks. Firms use them to shift capital between venues, settle positions and chase yield in DeFi.
Institutions often move tens of millions at once and need predictable, efficient execution. “If liquidity is spread out, trying to sell $10 million of one stablecoin and buy $10 million of another in a single step will move the market,” Saxe said. Large transfers typically must be split into multiple branches that may route differently and reconverge at the destination.
Fragmentation forces traders to navigate many chains, issuers and venues with differing liquidity. That can move prices, require trade splitting, and introduce execution uncertainty. “Right now, they don’t have the risk management, trust and infrastructure that they need to move or hold a lot of stablecoins at size onchain by default,” Saxe added.
Infrastructure, not just supply, is needed
Firms are building infrastructure to bridge these gaps, but they approach the problem differently. Circle is positioning stablecoins as the backbone of a new onchain FX system that links multiple currencies, liquidity providers and settlement layers. Eco concentrates on routing and execution, aggregating liquidity across fragmented markets.
Both approaches acknowledge the same core issue: stablecoins exist across multiple chains and issuers, but liquidity is distributed unevenly. Moving funds means interacting with fragmented liquidity, which creates price differences, routing complexity and execution risk. “Fragmentation creates more spread between prices, meaning worse execution in many cases. To solve that, you need to read across markets, see the full liquidity picture, even if it’s fragmented, and route across it,” Saxe said.
For institutions, that complexity constrains how much capital they’ll move onchain. Stablecoin flows must become more predictable and trustworthy before many institutional players will feel comfortable holding or transacting large onchain balances.
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