Liquidity crisis? USDT market capitalization has shrunk for two consecutive months, and stablecoin growth has stagnated

Data shows that the world’s largest stablecoin, Tether (USDT), has experienced its first consecutive two-month decline since the Terra collapse in 2022. This tightening of the market “liquidity fuel” indicator, combined with weak demand for Bitcoin ETFs, casts a shadow over the crypto market’s efforts to rebound.

According to the latest market data, the global market cap of Tether (USDT) continued to decline by 0.8% this month to $183.61 billion, extending the decline from its all-time high of $186.84 billion in January by about 1%. This marks the second consecutive month of total market cap contraction for USDT and is the first such sustained decline since the stablecoin trust crisis triggered by the TerraForm Labs collapse in 2022.

Liquidity “Water Source” Tightens

Stablecoins play a crucial role in the crypto ecosystem, serving not only as a bridge for investors entering the crypto world from fiat but also as an important support for market trading depth. Analysts generally view the total supply of stablecoins as an intuitive indicator of off-chain capital inflows. The continuous shrinkage of USDT’s market cap is often interpreted as net capital outflows from the crypto market or a significant sign of insufficient new inflow momentum.

“Stablecoins are the ‘liquidity fuel’ of the crypto market. When their supply contracts, it often means a decline in purchasing power,” said an analyst. Against this backdrop, Bitcoin, as a market indicator, also shows signs of struggle. After finding support around $60,000 on February 6, Bitcoin briefly showed rebound momentum and touched above $70,000. However, as of February 25, according to the latest data from Gate, Bitcoin’s price has fallen back to around $65,000 and is consolidating, unable to sustain upward momentum.

USDC Growth Stalls, Structural Slowdown Confirmed

Not only USDT, but another major stablecoin, USD Coin (USDC), is also facing an unfavorable situation. Although USDC’s market cap has rebounded from a low of $70 billion in January to about $75 billion now, its overall growth for the year has largely stagnated when viewed over a longer period. The simultaneous slowdown in expansion momentum of these two leading stablecoins further reinforces market expectations of “incremental funds on hold.”

Market analysts believe that if the supply of USDT and USDC cannot re-enter an expansion phase in the short term, the overall recovery of the crypto market will face severe liquidity constraints. Especially with the continued weak demand for US spot Bitcoin ETFs in the U.S., a market lacking internal liquidity will cast doubt on the sustainability and strength of any rebound.

Market Sentiment Remains Cautious

On-chain data indicates that market participants are currently cautious. The stagnation in stablecoin supply not only reflects tight liquidity but also mirrors investors’ risk-averse psychology amid macroeconomic uncertainties. For a market that relies heavily on liquidity support, the ongoing contraction of USDT is a warning sign that warrants close attention.

As a one-stop digital asset trading platform, Gate will continue to monitor the dynamics of stablecoin market caps and the price trends of major assets like Bitcoin, providing timely and accurate market data and analysis. In the current environment of tightening liquidity, investors should pay more attention to risk management and closely follow subsequent changes in capital flows.

Whether the market can regain upward momentum in the future largely depends on whether the “water source” of stablecoin supply can be replenished.