USDT Contraction Triggers Bitcoin Decline as Market Seeks Liquidity Boost

CryptoQuant analysts believe that Bitcoin's recent decline is linked 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.

This reduction in USDT supply has accelerated, with a decrease of almost $870 million in just the last 11 days. CryptoQuant emphasizes that this is no longer inertia from old investor decisions, but an active trend continuing to develop right now.

Historically, periods of strong USDT supply growth often coincided with Bitcoin strengthening, while a prolonged reduction in stablecoin volume was accompanied by weaker demand, deeper corrections, and worsening market conditions. According to CryptoQuant, Bitcoin's weak recovery attempts are explained by a lack of stablecoin liquidity.