Tether’s Latest Bitcoin Move Highlights Shrinking Liquid Supply

This article was first published on The Bit Journal: Will Tether’s action of withdrawing Bitcoin from Bitfinex create BTC liquidity shock that could increase volatility? Read on to discover.

Tether has reportedly withdrawn 8,889 Bitcoins from Bitfinex; an action that analysts believe could cause a liquidity shock and consolidate the market. The move aligns with a growing trend in which digital assets are leaving cryptocurrency exchanges and thinning the liquidity supply of coins.

According to data from LookOnChain, Tether transferred Bitcoin holdings worth an estimated $779 million from the exchange, bringing its entire BTC holdings to at least 96,370 coins valued at over $8.46 billion. Demands for BTC appear to be absorbing the large outflows, a shift consistent with strategic accumulation that’s believed could create a BTC liquidity shock rather than an urgent speculative move.

Liquidity Draining Steadily Rather Than Abruptly

The move by Tether highlights a growing trend in which large Bitcoin holders are withdrawing their coins from cryptocurrency exchanges. The attendant result is a BTC liquidity shock, where supply thins out, which could strengthen Bitcoin’s price growth.

This happens at a period where spot exchange net glows have remained negative, meaning there’s most likely accumulation that goes beyond isolated whale activity. According to data from CoinGlass, liquidity drained steadily rather than abruptly, and as balances declined, sell-side depth weakened as price became more sensitive to Bitcoin’s incremental demand.

A Sign of Continuing Institutional Confidence in BTC

Bitcoin is currently trading at $88,725, and analysts believe that if the anticipated BTC liquidity shock pushes the flagship cryptocurrency above $90,000, the move could trigger a cumulative short liquidation intensity of $541 million on leading centralized exchanges. On the other hand, if the price of Bitcoin dropped below $87,000 the result would be cumulative long liquidation to at least $703 million.

According to BlockBeats, the emerging liquidation map highlights the growing relative intensity of each cluster with potential liquidity reaction at the predicted price levels.

Tether’s systematic withdrawals and accumulation of Bitcoin signal continued institutional confidence in BTC and other cryptocurrencies as treasury reserve assets. The firm recently reported that it earned over $13 billion in net profits in 2024, mostly from interest on U.S. Treasury Holdings. USDT remains the world’s largest stablecoin, with a supply exceeding $144 billion, accounting for approximately 61% of the total stablecoin market.

Conclusion

The Stablecoin supplier currently holds over $97.6 billion in U.S. Treasury Securities, placing it among the top 20 largest global holders. The company promotes a diversified reserve strategy that includes Bitcoin and gold reserves valued at at least $5 billion, in addition to other traditional financial instruments. Tether’s quarterly Bitcoin purchases are consistent with an accumulation pattern, providing predictable institutional demand that could cause a BTC liquidity shock regardless of short-term price volatility.

Glossary of Key Terms

Tether: A company that issues stablecoins (like USDT) designed to mirror the value of traditional currencies, most commonly the U.S. dollar, at a 1:1 ratio, providing digital stability in volatile crypto markets for trading and payments.

Liquidity shock: A sudden, unexpected event that creates a severe shortage of cash or easily convertible assets, preventing individuals, companies from meeting immediate financial obligations.

Volatility: How much and how fast a digital asset’s price swings up or down, indicating risk and potential return.

Frequently Asked Questions about BTC liquidity shock

What is a cryptocurrency liquidity shock?

A liquidity shock occurs when the market for a cryptocurrency suddenly has too few buyers or sellers relative to trading volume.

How would a crypto liquidity shock affect the market?

Liquidity shock makes it difficult to execute trades quickly and at stable prices, leading to high slippage (the difference between the expected price and the executed price).

What causes a crypto liquidity shock?

Several factors can cause a liquidity shock, but most often it is a sudden mass withdrawal, such as a “bank run” on an exchange or lending platform, often triggered by bad news or a loss of confidence (e.g., the FTX crisis), that can quickly drain available funds.

References

X/LookOnChain

CoinGlass

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