On February 25, it was reported that the world’s largest stablecoin, USDT, showed signs of contraction again, marking the second consecutive month of decline, prompting a reassessment of liquidity and capital strength in the crypto market. The latest data indicates that USDT’s market cap decreased by approximately 0.8% this month to $183.6 billion, a significant drop from the previous all-time high of $186.8 billion, continuing the downward trend from January. This sustained shrinkage is rare since the stablecoin trust crisis in 2022, leading to a more cautious market sentiment.
Stablecoins have long been regarded as a “capital reservoir” in the crypto market, with their size changes often directly reflecting off-chain capital inflows or outflows. Analyst Rachael Lucas pointed out that a reduction in stablecoin supply usually signals decreased market purchasing power. When liquidity tightens, the upward momentum of mainstream assets is also suppressed. The current weakening of USDT’s market cap is interpreted by some institutions as an important sign that funds have not yet significantly flowed back into crypto assets.
Meanwhile, Bitcoin’s price, after falling to the $60,000 range in early February, briefly rebounded above $70,000 but then oscillated back down to around $65,000, indicating a lack of sustained incremental capital support. The slowdown in stablecoin supply growth combined with waning spot ETF demand has led to differing opinions on the sustainability of this crypto rally.
Structurally, stablecoins are not only used for trading settlement but also serve as important mediums for cross-border capital flows and on-chain payments. In some countries, stablecoins even function as a dollar-like payment method. Therefore, changes in USDT’s market cap are often viewed as a key indicator of risk appetite in the crypto market.
It is also noteworthy that the growth of another major stablecoin, USDC, has similarly stagnated, with its market cap remaining within a range, indicating a slowdown in the overall expansion of the stablecoin sector. Funds have not significantly shifted to alternative stablecoins, further reinforcing the market view of “waiting on incremental capital.”
If stablecoin supply continues to shrink, it could have chain reactions on Bitcoin prices, altcoin liquidity, and on-chain trading activity in the short term. The market will next focus on changes in stablecoin issuance, institutional capital allocation, and macro interest rate environments to assess whether the crypto market has new upward momentum.
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