Bitcoin analysis suggested that sell pressure would not increase given the historically large contraction in USDT market cap over a 60-day period.
Biggest stablecoin Tether (USDT) has shed $4 billion in market cap in just two months, but history suggests that the downturn is nearly over.
Onchain analytics platform CryptoQuant in a blog post last week flagged market cap “undergoing one of its sharpest contractions on record.”
“The deterioration has also accelerated at the margin: nearly $870 million of USDT supply disappeared over the latest 11-day period, showing that the contraction is not merely a legacy effect from earlier redemptions,” analysts wrote.
CryptoQuant data puts the 30-day simple moving average (SMA) of 60-day USDT market-cap change at minus $4.88 billion as of Aug. 10.
USDT 60-day market-cap change vs. BTC/USD. Source: CryptoQuant
The extent of the drawdown echoes crypto bear markets and rivals the largest ever seen. Its severity has implications for Bitcoin and the broader market recovery. Stablecoins provide a key source of liquidity, and when this evaporates, less capital or “dry powder” is available for deployment, showing a lack of interest among investors in stepping in at a given price.
“The caution is that correlation between USDT flows and BTC price doesn’t settle causality. Both likely respond to the same risk-off conditions, with redemptions accelerating alongside spot selling rather than strictly ahead of it,” CryptoQuant analysts said. They added:
Expanded USDT 60-day market-cap change vs. BTC/USD. Source: CryptoQuant
The steepest 60-day contraction period for USDT market cap completed on July 13, when it reached minus $5.72 billion.
Zooming out, CryptoQuant notes that the most pronounced contraction phases have historically occurred in the final phases of macro market downturns.
“Historically, the market’s deepest USDT contraction phases have also marked points where selling pressure was closer to exhaustion than to further acceleration,” it added.
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