Tether's (USDT) market capitalization growth turned negative for the first time since Q3 2023, dropping from over $187 billion to $184.3 billion since early January, a shift that historically precedes periods of sideways or declining Bitcoin (BTC) price action.
What Happened: Stablecoin Supply Contracts
CryptoQuant's 60-day average USDT Market Cap Change indicator flipped negative in February. The metric tracks the correlation between Bitcoin's price and USDT market cap growth — when USDT expands, fresh liquidity flows into crypto, and when it contracts, capital exits.
The decline coincides with significant burn activity by Tether.
On Feb. 10, Whale Alert reported a 3.5 billion USDT burn, following a 3 billion USDT burn last month.
CryptoQuant data shows these are the two largest consecutive burns in history. Burns occur when investors redeem USDT for fiat currency; Tether removes the tokens from circulation to maintain its 1:1 peg with reserves.
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Why It Matters: Weakening Buy Pressure
Analyst Crypto Tice said the implications are straightforward: buying power diminishes, downside support erodes and rallies get sold off faster. "Historically, sustained upside in $BTC doesn't happen when stablecoin supply is contracting," Tice said.
Investor Ted echoed the concern. "USDT supply is now in a downtrend for the first time since Q1 2025. Not a good sign," he said.
Historical data offers some perspective, however.
Since 2022, periods when the 60-day average turned negative typically lasted about two months and coincided with Bitcoin forming local bottoms — as seen from November 2022 to January 2023 and August to October 2023.
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