Key Takeaways:
Tether's USDT supply has contracted by roughly $4 billion over 60 days, the deepest drawdown on record, signaling capital is leaving crypto.
Tether's USDT market capitalization has fallen about $4 billion over 60 days, the steepest contraction on record, as investors redeem stablecoins for fiat and pull liquidity from crypto markets.
"Periods of sustained USDT expansion have generally coincided with stronger Bitcoin price regimes, while prolonged contractions have accompanied weaker demand and deeper corrections," CryptoQuant analysts wrote in a blog post.
The 30-day moving average of the 60-day USDT market-cap change stood at minus $4.88 billion as of Aug. 10, according to CryptoQuant. The steepest 60-day contraction completed July 13 at minus $5.72 billion, and roughly $870 million of USDT supply disappeared over the latest 11-day period. Circle's USDC shed $2.2 billion over the same 60 days.
The drawdown matters because stablecoins provide the "dry powder" that funds crypto buying. With less USDT in circulation, less capital is available to deploy into Bitcoin and other assets. Bitcoin traded at $63,975, down 1.17 percent, as markets await US CPI and PPI data due Wednesday and Thursday, which will shape expectations for the Federal Reserve's Sept. 16 meeting.
USDT drawdown points to selling exhaustion
Onchain analyst Stacy Muur said the contraction partly reflects direct outflows, with some investors swapping stablecoins for fiat and exiting crypto entirely after Bitcoin fell from its 2025 peak. "In part, this looks like a direct outflow of funds," Muur said, citing CryptoQuant data. She added that some capital is chasing yield, with Circle offering more opportunities, though USDC's supply is shrinking even faster on a relative basis.
CryptoQuant, however, argues the worst of the selling may be over. "Historically, the market's deepest USDT contraction phases have also marked points where selling pressure was closer to exhaustion than to further acceleration," the firm said. It cautioned that the correlation between USDT flows and Bitcoin price does not settle causality, since both respond to the same risk-off conditions, with redemptions accelerating alongside spot selling rather than strictly ahead of it.
Bitcoin divergence between whales and retail
The stablecoin drain coincides with a split in Bitcoin positioning. Addresses holding more than 10,000 BTC added 46,420 BTC on a 60-day rolling basis on Aug. 9, the largest accumulation since March 15, according to CryptoQuant. Smaller wallets holding 0.1 to 1 BTC distributed about 9,700 BTC over the 60 days through Aug. 9, a divergence the firm called notable for showing two different positioning trends developing at once.
Bitcoin set a new August high of $65,420 into Sunday's weekly close before consolidating, with the 50-month exponential moving average overhead at $65,827. Trader Michaël van de Poppe flagged $65,800 as the key level for bulls to break, while Glassnode's Rafael Schultze-Kraft said daily spot turnover sits at 0.32 percent, the lowest in its data, with dollar volume down about 64 percent year over year.
Independent analyst William Clemente said Bitcoin is "cheap" although a leg lower is possible, and pointed to a bullish divergence between BTC/USD and the relative strength index on weekly time frames that accompanied the end of the 2022 bear market. The US CPI and PPI prints, due Wednesday and Thursday, will test whether the largest holders' accumulation holds as the market weighs the next Fed move.
This article is for informational purposes only and does not constitute investment advice.
