USDT market cap drops $4B in two months, nearing record contraction

Odaily Planet Daily reports that CryptoQuant analyst Moreno says USDT liquidity is entering one of its sharpest contraction phases on record. USDT's market capitalization has fallen by about $4 billion over the past 60 days, approaching its most negative reading historically. The pullback is still intensifying. Over the last 11 days alone, USDT supply has shrunk by roughly $870 million, suggesting the move is not simply a delayed after-effect of earlier redemptions. Stablecoins remain one of the crypto market's most direct sources of liquidity. Historically, sustained growth in USDT supply has tended to coincide with stronger BTC price action. Extended contraction phases more often align with softer demand, market pullbacks, and lower risk appetite. Moreno cautioned that the relationship between USDT flows and BTC price does not establish direct causation. Both can be driven by broader risk-off sentiment, with redemption pressure occurring alongside spot selling. In this context, the current BTC decline is unfolding amid a continuing squeeze in a key liquidity channel, helping explain why recent rebounds have struggled to build momentum. Moreno said market conditions would improve if the 60-day change in USDT stabilizes, the pace of daily supply contraction slows, and USDT returns to an expansion phase.