Crypto News: Tether’s USDT Heads for Largest Monthly Supply Drop Since FTX Collapse
Tether’s USDt (USDT) is on track for its sharpest monthly supply contraction since the 2022 collapse of FTX, as large holders continue to redeem or reduce exposure, according to blockchain data.Data from Artemis Analytics cited by Bloomberg shows that USDT’s circulating supply has declined by roughly $1.5 billion so far in February, following a $1.2 billion drop in January. If the trend holds through month-end, February would mark the largest monthly decline in USDT supply in nearly three years.The last comparable contraction occurred in December 2022, when USDT supply fell by around $2 billion in the aftermath of the FTX bankruptcy, which triggered widespread deleveraging across the crypto market.USDT Decline Raises Liquidity QuestionsUSDT is the largest U.S. dollar–pegged stablecoin and a core source of liquidity for crypto trading. With a market capitalization of roughly $183 billion, it represents about 71% of the total stablecoin market, according to CoinMarketCap.As a result, sustained declines in USDT supply are often viewed as a proxy for tightening crypto liquidity, particularly during periods of heightened market uncertainty.Tether Pushes Back on “Trend” NarrativeTether disputed the interpretation that the February data reflects a structural shift.A Tether spokesperson said the figures represent short-term changes in circulating supply, emphasizing that the analysis is based on only 18 days of February data, which “does not establish a durable trend.”“For context, during the same period, USDC saw a $4.6 billion decline, or roughly 6%,” the spokesperson said, adding that recent changes appear more related to exchange-level distribution dynamics rather than a deterioration in end-user demand.“Short-term supply fluctuations should be viewed in the context of exchange programs and market structure, not as evidence of structural erosion in USDt’s position,” the spokesperson added.Total Stablecoin Market Continues to GrowDespite the pullback in USDT, the broader stablecoin market has not contracted.According to DeFiLlama, the total stablecoin market capitalization has risen 2.33% in February, increasing from $300 billion to $307 billion.While USDT and Circle’s USDC declined by 1.7% and 0.9%, respectively, other stablecoins expanded sharply. World Liberty Financial’s USD1 stablecoin — linked to the Trump family — posted a 50% increase in market capitalization over the past month, reaching $5.1 billion.Whales Reduce USDT Exposure, New Wallets Step InOnchain data suggests a split in behavior between large holders and new market participants.According to Nansen, whale wallets sold approximately $69.9 million in USDT across 22 wallets over the past week, representing a 1.6× increase in selling activity among large holders. “Smart money” wallets tracked by returns have also been net sellers.At the same time, new wallets created within the past 15 days accumulated around $591 million in USDT during the same period, indicating fresh demand offsetting redemptions by established players.Market Signals Mixed, Not CapitulativeThe divergence in flows points to reallocation rather than outright capital flight. Large investors appear to be trimming or repositioning liquidity, while new participants continue to adopt USDT as an entry point into crypto markets.While February is shaping up to be USDT’s largest monthly supply decline since 2022, the stability of the broader stablecoin market suggests the move reflects liquidity rotation and market structure dynamics, not a systemic loss of confidence in stablecoins.