Tether Supply Hits Worst Level Since 2022 as Smart Money Exodus Accelerates

▲ Tether (USDT), U.S. Dollar (USD) / ChatGPT-generated image

Tether (USDT), the world’s largest stablecoin, has recorded its biggest monthly supply contraction since the FTX collapse, raising alarms over capital flows in the cryptocurrency market.

According to Cointelegraph on February 21 (local time), USDT supply is expected to post its largest monthly decline since the historic plunge recorded during the FTX bankruptcy in 2022. Market analysts say that so-called “whales” and smart-money traders have been aggressively reducing their USDT holdings as part of risk management amid heightened volatility in the crypto market.

The decline comes after USDT had surged past a record market capitalization of $187.3 billion earlier this month. Widely used as a dollar-pegged medium of exchange and a barometer of liquidity in the digital asset market, USDT is now seeing large-scale capital outflows as Bitcoin (BTC) fluctuates unstably between $60,000 and $70,000. Investors appear to be redeeming stablecoins to move into cash or lock in profits.

Industry experts believe the decrease in USDT supply reflects more than a simple price correction, pointing instead to structural changes in the market. Ongoing uncertainty surrounding digital asset market structure legislation under discussion in the U.S. Senate has increased regulatory pressure on stablecoin issuers. Analysts also note that institutional investors may be shifting capital toward financial products with greater transparency or competing stablecoins.

On-chain data analytics firms have highlighted a noticeable decline in USDT deposits across decentralized finance (DeFi) protocols and major exchanges. While the current rate of decline is more gradual than the roughly 5.7% drop in USDT supply over about a week during the FTX collapse, concerns persist that it could lead to longer-term liquidity tightening. As a core source of market liquidity, outflows from USDT may weaken the rebound momentum of major cryptocurrencies, including Bitcoin.

The crypto market now stands at a critical juncture, with Bitcoin testing support around the $60,000 level while seeking direction. Even as major institutions, including Strategy, consider additional Bitcoin purchases, declining stablecoin liquidity could dampen overall market buying power. Investors are closely monitoring capital inflows and outflows through the end of the month, when the total scale of USDT redemptions will be confirmed, maintaining a cautious stance.

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