Tether’s market cap shrinks by $1.5B as traders pivot to USDC and cash
For the first time since the FTX meltdown, Tether’s USDT is seeing a significant monthly drop in its total supply. As the market cap slides, it signals that dry powder is leaving the ecosystem, making it harder for crypto prices to stage a quick recovery.
Tether’s USDT, the undisputed king of crypto liquidity, is suddenly getting a bit lighter.
According to the latest Bloomberg report, USDT is on track for its biggest monthly retreat in market capitalization since the chaotic days following the FTX collapse. To be clear: the token isn’t losing its $1 peg. Instead, the total amount of USDT in circulation is shrinking as traders initiate net redemptions, essentially trading their digital tokens back for hard cash.
Historical data from CoinMarketCap tells a concrete story. On February 1, USDT’s market cap sat at roughly $185.2 billion. Fast forward to mid-February, and that number has dipped to $183.7 billion. That $1.5 billion disappears from the market when Tether “burns” tokens after users cash out, effectively thinning the liquidity layer that usually supports aggressive spot buying.
On the data side, this isn’t just a mass exodus from crypto; it’s a strategic rotation. While USDT’s supply is contracting, USDC’s market cap has jumped from $70.4B to over $73.6B in the same two-week window. This suggests that institutional players are swapping their USDT for USDC, which is often perceived as a safer or more transparent harbor during periods of high volatility.
For the broader market, a shrinking stablecoin base is usually a bearish signal. When there’s less USDT sitting on exchanges, there’s less immediate buying power to absorb sell-offs. As DeFiLlama’s dashboard shows, the total stablecoin market cap is hovering around $308 billion, but the 30-day trend has finally turned negative.
The bottom line for traders? This retreat means the market’s shock absorbers are getting thinner. For more on what a stablecoin market cap drop actually means for Bitcoin’s price action, analysts point to a flight to safety that could keep volatility high in the coming weeks.
If redemptions continue at this pace, USDT might finish February with its most significant supply cut in over three years, forcing the market to look elsewhere for its next leg up.
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