USDT supply slump nears record lows, tightening crypto liquidity and weighing on BTC

ChainCatcher reports that CryptoQuant analyst Moreno said USDT liquidity is in one of its sharpest contraction periods on record. USDT market capitalization has fallen by about $4 billion over the past 60 days, close to the most negative reading historically. The drawdown is also picking up speed. Over the last 11 days, USDT supply dropped by roughly $870 million, a move Moreno said suggests more than a delayed aftereffect of earlier redemptions. Stablecoins are among the most immediate sources of deployable liquidity in crypto markets. Extended periods of USDT growth have typically aligned with stronger BTC price performance, while sustained contractions have often appeared alongside softer demand, market pullbacks, and lower risk appetite. Moreno cautioned that the relationship between USDT flows and BTC does not prove direct causation. Both can be driven by the same risk-off sentiment, with redemptions and spot selling occurring at the same time. In that context, the latest BTC weakness is unfolding as a key liquidity channel continues to shrink, helping explain why recent rebounds have struggled to build follow-through. Moreno added that conditions would improve if the 60-day USDT change stabilizes, daily supply declines slow, and issuance returns to expansion.