USDT market cap decline hits historical extremes, BTC faces liquidity pressure

ChainCatcher reports: CryptoQuant analyst Moreno stated that USDT liquidity is undergoing one of the most severe contraction phases in history. The USDT market cap has declined by approximately $4 billion over the past 60 days, nearing its most negative level on record. Meanwhile, the liquidity contraction is accelerating: over the past 11 days, USDT supply has decreased by about $870 million, indicating this is not merely a lagged effect from prior redemptions. Stablecoins represent the most direct source of available liquidity in the crypto market; sustained USDT expansion typically correlates with stronger BTC price performance, while prolonged contraction phases often coincide with weak demand, market corrections, and declining risk appetite. However, the correlation between USDT flows and BTC price does not imply direct causation—both may be jointly influenced by risk-averse sentiment, with redemption pressure and spot selling occurring simultaneously. The current BTC decline is not an isolated event but is occurring against the backdrop of a sustained shrinkage in one of the market’s primary liquidity sources, which also explains why recent rallies have struggled to gain momentum. To improve market conditions, we need to see the 60-day USDT change stabilize, daily supply contraction slow, and a return to expansion.