CryptoQuant analysts believe that bitcoin’s decline is related to a sharp contraction of liquidity in USDT, the largest dollar stablecoin from Tether. Over the past 60 days, its market capitalization has dropped by about $4 billion, making this one of the most notable declines in the asset’s history.
At the same time, CryptoQuant does not view what is happening solely as a negative signal. In their view, this dynamic may indicate that selling pressure in the crypto market is gradually fading and the market is approaching a transition to a bull phase.
USDT Liquidity Is Leaving the Market Faster and Faster
The reduction in USDT supply has accelerated. In just the last 11 days, the volume of the stablecoin in circulation has decreased by almost $870 million. CryptoQuant emphasizes that this is no longer inertia from old investor decisions, but an active trend that is continuing to develop right now.
Stablecoins remain one of the main sources of free money in the digital asset market. When USDT market cap falls, it essentially means an outflow of funds from the crypto market. Investors return tokens to the issuer and receive US dollars in exchange, and the volume of USDT in circulation decreases. In this situation, demand for Bitcoin also becomes weaker.
Historically, periods of strong USDT supply growth often coincided with bitcoin strengthening. Conversely, a prolonged reduction in stablecoin volume was accompanied by weaker demand, deeper corrections, and worsening market conditions. At the same time, the strongest USDT drawdowns in the past often occurred at moments when selling pressure was closer to ending than to intensifying.
Why Bitcoin Lacks Sustainable Demand
According to CryptoQuant, bitcoin’s weak recovery attempts are explained by a lack of stablecoin liquidity. There is not enough strong demand forming in the spot market because there are fewer free funds in USDT.
To get out of this zone, the market needs a steady inflow of liquidity. Analysts believe that USDT market cap must grow for at least two consecutive months: only such dynamics can confirm the return of money to cryptocurrencies and create a foundation for a stronger upward move.
In such a situation, traders usually keep several signals in sight:
- charts in TradingView;
- decisions of the Federal Reserve System;
- investor sentiment in the US;
- behavior of major players like BlackRock;
- stock dynamics;
- geopolitical risks, including the Strait of Hormuz.
All these factors can increase pressure on bitcoin, but in CryptoQuant’s assessment, USDT supply remains the key factor.
The Crypto Market Is Looking for Signs of a Reversal
Wintermute analysts see similar signals. In their opinion, the crypto market is already showing signs of ending the bear phase. The major cryptocurrency has remained resilient amid economic shocks, including the maintenance of lending rates in the US, and experts call this a positive sign for further dynamics.
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