Tether Dominance (USDT) has surged to 7.4%, its highest level in two years, as the total cryptocurrency market capitalization fell to approximately $2.5 trillion after four consecutive months of losses — a pattern analysts say mirrors conditions seen at the start of the 2022 bear market.
What Happened: Stablecoin Metric Flashes Warning
USDT.D broke above a resistance trendline at 6.5% while total market capitalization simultaneously broke below a key support level. Rising Tether dominance indicates investors are selling crypto assets into stablecoins and not yet ready to reallocate capital.
The metric measures USDT market capitalization relative to the total crypto market. Analysts view it as a reliable indicator for market tops and bottoms.
"USDT Dominance broke out as Bitcoin (BTC) dumped, but we are far from the range high," investor Crypto Tony tweeted. "Another reason I think Bitcoin has not reached the bottom yet."
Trader Tim suggested USDT.D could continue climbing toward 9.5%, a level that historically coincided with market bottoms in 2022. He noted that a retest of the 6.5% level could present an opportunity to consider short positions.
Also Read: Dogecoin Rally Hits Wall At $0.1065 Level
Why It Matters: Exchange Flows Signal Deeper Trouble
CryptoQuant data reveals stablecoin inflows to exchanges have turned sharply negative since November. Exchange inflows averaged $9.7 billion per month in October, with Binance receiving about $8.8 billion of that total.
Starting in November, flows reversed by $9.6 billion. They remained negative by more than $4 billion in early 2026, with Binance alone seeing $3.1 billion in outflows.
"Taken together, these dynamics highlight the particularly challenging environment in which Bitcoin is currently operating, weighed down by a persistent lack of liquidity that has now been impacting the market for several months," CryptoQuant analyst Darkfost said.
Investors are not only rotating from Bitcoin and altcoins into stablecoins but also withdrawing stablecoins from exchanges entirely.