Tether Dominance Jumps to 6% and Flashes Market Risk

Rising Tether dominance in November 2025 is shaking sentiment across digital asset markets, as investors shift into USDT and signal caution on further crypto downside.

Why is tether dominance above 6% raising concern?

In November 2025, the Tether Dominance index (USDT.D) and the USDT’s market cap relative to the total crypto market cap officially surpassed 6%. It also broke above a descending trendline that had remained intact since 2022, a technical move many analysts see as a warning for broader risk assets.

Market observers note that USDT.D breaking this long-term resistance level has historically preceded major corrections. Moreover, such breakouts can even foreshadow an extended bear market for the entire crypto ecosystem, as capital retreats into stable, dollar-pegged instruments.

How significant is the November spike in USDT.D?

According to TradingView data, USDT.D climbed to 6.1% on November 18 before easing back to 5.9%. Earlier in the month, the metric had been sitting below 5%. This swift rise underscores how quickly sentiment has turned defensive among both retail and institutional participants.

Instead of buying deeply discounted altcoins, many traders have rotated capital into the most liquid stablecoin on the market. That said, this shift is not just a short-term trade; it often reflects deeper unease about macro conditions, regulatory headwinds, or the sustainability of recent rallies.

Historical data indicate a strong inverse correlation between USDT.D and the total crypto market capitalization. Therefore, the tether gauge breaking above a trendline that has held for nearly four years may signal further market-wide declines ahead, even if prices temporarily stabilize.

Several analysts now expect USDT.D to climb toward 8% by the end of the year, effectively projecting that a bear market may be forming in November. However, this scenario still depends on whether fear continues to build and risk appetite remains subdued in the coming weeks.

What does the shrinking stablecoin market cap reveal?

Alongside the dominance shift, the well-known analyst Milk Road highlights a notable change in the broader stablecoin landscape.

Citing DefiLlama stablecoin data, he points out that the total stablecoin market cap fell from $309 billion at the end of October to $303.5 billion in November.

The stablecoin sector has therefore shed approximately $5.5 billion in less than a month. Moreover, this is the first significant decline since the 2022 bear market, when capital fled risk-on assets and on-chain liquidity dried up across DeFi and centralized venues alike.

The DefiLlama chart shows that, after four years of near-continuous growth, the curve for the total stablecoin market cap has flattened and is starting to turn downward. This inflection suggests that the market is no longer receiving the same level of fresh fiat inflows that supported the last cycle.

The combination of a shrinking stablecoin market cap and rising USDT.D points to a broader structural trend. Investors appear not only to be selling altcoins into stablecoins, but also withdrawing those coins from the crypto system entirely, effectively reducing crypto market liquidity.

Is this just another altcoin capital rotation?

For years, traders have treated USDT flows as a signal of classic altcoin capital rotation. When speculative tokens underperform, funds often move back into stablecoins before rotating once again into new narratives. However, the current pattern looks more defensive than cyclical.

Expanding supply means fresh liquidity entering the system. When it flattens or reverses, it signals that the inflows powering the rally have cooled, Milk Road explained, referring to the stablecoin total market cap. His view suggests that the engine behind aggressive bull markets is idling, not accelerating.

That said, he also stresses that the situation does not necessarily point to a systemic crisis. Instead, the market is operating with less fuel for the first time in years, and such adjustments often precede meaningful price repricing across major assets like Bitcoin, Ethereum, and high-beta altcoins.

Why are exchange-held stablecoins rising while supply falls?

Despite the falling stablecoin market cap, the amount of stablecoins held on exchanges has actually increased in November, creating an interesting divergence between supply and positioning.

This rise in exchange held stablecoins suggests that at least part of the investor base is not exiting crypto entirely. Instead, many appear to be waiting on the sidelines in dollar-pegged assets, potentially preparing to buy into any sharp dips as the year draws to a close.

Moreover, building stablecoin balances on trading platforms often precede periods of renewed spot and derivatives activity. If macro conditions stabilize, that sidelined capital could quickly rotate back into Bitcoin and leading altcoins, softening the impact of any deeper downturn.

What are the key signals for investors monitoring tether dominance?

For now, the jump in tether dominance, combined with the first major pullback in stablecoin supply since 2022, paints a cautious picture for November 2025. However, rising exchange reserves highlight that a significant war chest remains within reach of the market.

Investors tracking the USDT.D index, stablecoin aggregate supply, and on-exchange reserves should therefore treat these signals together rather than in isolation. In the months ahead, the interaction between these metrics will likely determine whether Novembers shift marks the start of a prolonged bear phase or a temporary reset before the next leg higher.