USDT Market Cap Shrinks, Largest Since 2022 FTX Collapse

• USDT’s supply has decreased by 1.7% over the past month, and $1.5 billion in February.
• Its market cap has dropped from over $187 billion to around $184.3 billion in one month.
• Tether burned 3.5 billion USDT in February, after also burning 3 billion last month.

USDT, the world’s biggest stablecoin, is declining faster than it has since the FTX crash in 2022. To be more precise, USDT’s circulating supply has decreased by 1.7% over the past month, and $1.5 billion in February so far. That shift points to changing money flows in crypto and could be a sign that speculative trading is cooling off.

USDT’s market cap has dropped from over $187 billion in early January to around $184.3 billion by mid-February. This is likely happening because more people are cashing out their stablecoins for regular money (increased redemption activity), which often means investors are pulling back from crypto or moving their funds elsewhere.

The drop could also be linked to Tether intentionally removing tokens from circulation. On February 10, Whale Alert flagged that Tether burned 3.5 billion USDT, after burning 3 billion last month.

Stablecoins like USDT are the backbone of crypto trading as they are used for settling deals, providing liquidity, and moving money across borders. With the entire stablecoin market now worth over $300 billion, even a small dip can hint at bigger shifts in investor sentiment and where money is flowing.

Related: USDT’s Weakest Peg in Years Reignites Crypto Liquidity Fears

Regulatory Influence

Regulatory developments like the EU’s Markets in Crypto-Assets (MiCA) are pushing big investors toward stablecoins that are seen as more compliant, like USDC or euro-based digital tokens. As regulated options gain clarity, USDT is losing some ground in certain markets.

While the EU’s MiCA framework has already been in effect for some time now, its mandatory application for all Crypto-Asset Service Providers (CASPs) across the EU is scheduled for full implementation by July 1, 2026.

USDT’s decline is noteworthy because it is the go-to stablecoin worldwide. Its applications vary, including being used to settle trades on most big exchanges, pairing with thousands of cryptos, and providing a huge chunk of liquidity in DeFi. 

When the supply of stablecoins shrinks, that can pull liquidity out of the market and soften price support. 

Unlike past downturns, this USDT drop doesn’t look like it’s due to the stablecoin losing its $1 peg, considering it’s still trading close to that. However, if the supply keeps falling, it could affect prices across the board, especially in DeFi liquidity pools and exchange flows.

Related: Tether Freezes $182 Million In USDT Across Five Tron Wallets