Biggest stablecoin Tether (USDT) has shed $4 billion in market cap in just two months, but history suggests that the downturn is nearly over.
Key points:
- Tether’s 60-day rolling market-cap contraction stays near $4 billion in one of its heaviest drawdowns.
- Analysis suggests that the worst of bear-market selling pressure could be over as a result.
- Comparison to 2022 bear-market highlights an ongoing RSI divergence.
USDT drawdown puts “acceleration” of Bitcoin selling in doubt
Onchain analytics platform CryptoQuant in a blog post last week flagged market cap “undergoing one of its sharpest contractions on record.”
“The deterioration has also accelerated at the margin: nearly $870 million of USDT supply disappeared over the latest 11-day period, showing that the contraction is not merely a legacy effect from earlier redemptions,” analysts wrote.
CryptoQuant data puts the 30-day simple moving average (SMA) of 60-day USDT market-cap change at minus $4.88 billion as of Aug. 10.
USDT 60-day market-cap change vs. BTC/USD. Source: CryptoQuant
The extent of the drawdown echoes crypto bear markets and rivals the largest ever seen. Its severity has implications for Bitcoin and the broader market recovery. Stablecoins provide a key source of liquidity, and when this evaporates, less capital or “dry powder” is available for deployment, showing a lack of interest among investors in stepping in at a given price.
“The caution is that correlation between USDT flows and BTC price doesn’t settle causality. Both likely respond to the same risk-off conditions, with redemptions accelerating alongside spot selling rather than strictly ahead of it,” CryptoQuant analysts said. They added:
“Periods of sustained USDT expansion have generally coincided with stronger Bitcoin price regimes, while prolonged contractions have accompanied weaker demand, deeper corrections, and deteriorating market conditions.”
Expanded USDT 60-day market-cap change vs. BTC/USD. Source: CryptoQuant
The steepest 60-day contraction period for USDT market cap completed on July 13, when it reached minus $5.72 billion.
