Stablecoins Rise Strongly, Ethereum's Second Market Cap Position in Jeopardy

Author: Yashu Gola Source: cointelegraph Translation: Shan Oba, Golden Finance

As the stablecoin market continues to expand, Ethereum faces the risk of losing its position as the #2 spot by crypto market capitalization. Polymarket’s prediction data shows that the probability of Ethereum dropping to #2 in 2026 has jumped from 17% at the start of the year to more than 59%.

Ethereum’s grip on the #2 position in the crypto market is steadily loosening. This is not because it is getting closer to overtaking Bitcoin, but because the stablecoin ecosystem is experiencing explosive growth.

Key takeaways

• As Tether (USDT) accelerates its growth, Ethereum’s position as the #2 asset by market cap continues to face pressure

• Over the past five years, Ethereum’s gains have fallen far short of the two leading stablecoins, USDT and USDC

• In 2026, Ethereum’s #2 spot by market cap may change hands

Over the past five years, among the main competitors vying for the #2 spot by market cap, Ethereum has significantly lagged in performance—its biggest challenger being the stablecoin USDT issued by Tether.

Measured on a five-year cycle, Ethereum’s market cap has grown by only about 11.75%, and its current market cap is about $240 billion.

In sharp contrast, among crypto assets ranked in the top three by market cap, USDT’s market cap increase over the same period is as high as 622.5%, and its market cap has already surpassed $184 billion. Even Ripple (XRP) and USD Coin (USDC) have seen gains that exceed Ethereum’s.

Against this backdrop, more and more traders are starting to bet that Ethereum will be overtaken in 2026.

On the prediction platform Polymarket, more than 59% of participants have bet that Ethereum will lose its #2 position by market cap in 2026, while that probability was only 17% at the start of the year.

Why is Ethereum getting overtaken by Tether?

Ethereum and Tether have entirely different growth logics: the former is a native cryptocurrency, while the latter is a stablecoin pegged to fiat currency.

Ethereum’s market cap is highly dependent on rising ETH prices, and in 2026 the crypto market continues to face sustained pressure, with macro headwinds piling up: the U.S. imposes tariffs, geopolitical conflicts between the U.S. and Iran, and cooling expectations for Federal Reserve rate cuts—all of which make it difficult for ETH prices to maintain their uptrend.

This weakness is also reflected in institutional demand. The total managed assets of U.S. Ethereum spot ETFs have shrunk by about 65%, dropping from $31.86 billion in October last year to $11.76 billion in March this year, highlighting that investment enthusiasm for ETH has noticeably cooled in recent months.

By contrast, Tether’s growth is mainly driven by capital flowing into the stablecoin market, as investors buy “crypto dollars.” When traders seek hedging, liquidity, and operational flexibility rather than holding high-volatility assets like ETH, demand for stablecoins rises significantly.

The global total market cap of stablecoins is currently $310 billion, whereas in 2020 it was only about $5 billion; Tether holds 58% of the market share.

During periods when risk-averse sentiment in the market rises, investors tend to hold dollar-pegged stablecoins as “reserve ammunition,” waiting for a better entry opportunity for other crypto assets; this kind of demand is typically very resilient.

Ethereum needs a significant rebound in market risk appetite to push prices higher, while Tether benefits when investors shift to defensive strategies. This also explains why, even though Ethereum remains core infrastructure in the crypto sector, its market cap growth rate still lags behind USDT.

Will ETH’s price keep falling in 2026?

From a technical perspective, Ethereum still faces further downside risks in 2026.

As of Sunday, ETH’s price action shows a clear “bearish flag” pattern; if the price breaks down effectively below the lower trendline of this pattern, the probability of further downside will increase substantially.

If the breakdown below the lower trendline continues, ETH’s price could fall to around $1,250—the target level indicated by the flag pattern—before June.