Why Is Tether USDT Supply Crashing? Biggest Monthly Drop Since FTX as USDC Surges

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Well, hold onto your wallets, because Tether’s USDT has just experienced a dramatic $1.5 billion supply drop in February! That’s right, it’s the biggest monthly decline since we all collectively gasped at the FTX fiasco back in December 2022. The circulating supply has plummeted to about $183.7 billion as of February 19, down from a whopping $187 billion peak in early January, according to the ever-reliable Artemis Analytics (you know, the folks who keep track of these things like it’s a sport).

But here’s the real kicker: the money isn’t actually disappearing into the abyss of the financial void. Nope, it’s just packing its bags and taking a little vacation from Tether.

In fact, the total stablecoin market has decided to grow up a bit, reaching $304.6 billion in February, up from $302.9 billion at the end of January. And guess what? Circle’s USDC is strutting around like it owns the place, climbing nearly 5% to a cozy $75.7 billion during the same timeframe. Redemptions are outpacing new USDT issuances, leading us to believe that capital is simply rotating-like a well-oiled dance floor rather than a messy breakup.

Why Is USDT Supply Dropping?

Ah, three little gremlins are currently working against Tether:

  • A broad crypto selloff that erupted in October has wiped out a staggering $2 trillion in market value. Talk about a bad hair day! This has shrunk demand for stablecoin liquidity faster than I can say “Where’s my money?”
  • Then there’s Europe’s MiCA regulations, which are making exchanges tighten their belts and restrict those non-compliant stablecoins. Who knew compliance could be so fashionable?
  • And let’s not forget Bitcoin’s decline this year, which is like a wet blanket on the trading party, reducing the leverage and trading activity that typically fuels USDT demand.

USDC Gains Ground While Tether Contracts

Fast forward to 2025, where total stablecoin transaction volumes hit an astronomical $33 trillion. USDC proudly boasts $18.3 trillion of that total, while USDT is left with a mere $13.3 trillion. It seems Circle’s stablecoin is processing more volume than Tether, despite having less than half the market cap. Who would have thought? A classic underdog story!

And let’s sprinkle in some U.S. support for stablecoins, which has ignited new competition. World Liberty Financial, one of the Trump family’s crypto ventures (because why not?), launched its USD1 stablecoin in March 2025 and is scaling up faster than a toddler on a sugar rush.

Should USDT Holders Worry?

Alright, time for a reality check. The February decline is just a 0.8% drop. In 2022, USDT saw contractions of 13%, 9%, and 6% in consecutive months. So, really, this is just a minor hiccup in the grand scheme of things. USDT’s $1 peg remains stable, and reserves appear intact-thank goodness!

Still, the stablecoin landscape is shifting like a game of musical chairs. Tether’s once-untouchable dominance is being tested from all sides. Whether this is merely a temporary liquidity adjustment or the beginning of a structural rotation will depend on how aggressively MiCA enforcement tightens and if institutional capital continues to favor regulated alternatives. Grab your popcorn; this is going to be entertaining!

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2026-02-20 17:01