Tether (USDT), the largest stablecoin by market capitalization, has seen $4 billion wiped from its market cap over the past two months. This development has caught the attention of analysts, who indicate that the sharp contraction may signal an end to the ongoing bear market in the cryptocurrency sector.
ETH
SOL
BSC
ROBINHOOD
USDT
AAPLUSDT market cap faces significant contraction
Onchain analytics provider CryptoQuant reported last week that Tether’s market cap is facing one of the sharpest drawdowns on record. Over an 11-day stretch, the supply of USDT shrank by nearly $870 million, pointing to an acceleration of the contraction instead of it being solely a result of earlier redemptions.
Data from CryptoQuant as of August 10 placed the 30-day simple moving average (SMA) for the 60-day change in Tether’s market cap at minus $4.88 billion. The most intense period of contraction ended on July 13, when the 60-day figure reached minus $5.72 billion, matching levels typically seen during crypto bear markets.
Stablecoins such as USDT are viewed as a key liquidity source across crypto markets. A declining supply indicates less available capital, or “dry powder,” which can suggest diminished investor interest at current market levels.
Historical context and implications for Bitcoin
CryptoQuant noted that previous contractions of this magnitude typically occurred near the end of broader market downturns. Such periods have historically coincided with a phase where selling pressure abates, rather than intensifies.
CryptoQuant pointed out that the deepest USDT market cap contraction phases have generally signaled periods where selling pressure was moving toward exhaustion instead of a further selloff.
The analysts cautioned, however, that while major outflows from USDT and a weaker Bitcoin price often coincide, the two developments likely stem from the same risk-off sentiment rather than a strict cause-and-effect relationship. They warned that redemptions tend to pick up alongside spot selling, rather than always leading it.
Tether is issued by Tether Limited, a company that manages the supply of USDT as a dollar-pegged stablecoin. It is widely used across crypto markets as a source of dollar-denominated liquidity.
Mini dictionary: Relative strength index (RSI), a momentum oscillator that measures the speed and change of price movements to identify overbought or oversold conditions and potential trend reversals.
Analysts’ outlook: Potential for market reversal
CryptoQuant’s observations have fed into growing sentiment that the worst phase of the bear market may be drawing to a close. According to other reports, many market participants are increasingly positioning for a new Bitcoin macro bottom by the end of 2026, though analysts also warn of short-term volatility ahead.
Independent analyst William Clemente, who regularly covers Bitcoin trends, described the Bitcoin network as “fundamentally healthy” in an outlook posted on August 8. He stated that Bitcoin appears comparatively “cheap,” but left room for another possible downward move within the year.
William Clemente emphasized the significance of a developing bullish divergence between BTC/USD and the weekly RSI, calling it a classic reversal signal similar to what marked the end of the 2022 bear market.
Historical analysis of the one-week BTC/USD chart shows marked RSI divergences during previous market bottoms, which have acted as reliable indicators of impending bullish reversals.
