Analysis: USDT's market cap decline has reached an historically extreme level, and BTC's rebound is facing liquidity contraction pressure.

CryptoQuant analyst Moreno noted in a post that USDT liquidity is experiencing one of the most severe contraction phases in its history. The 60-day change in USDT’s market capitalization has fallen by approximately $40 billion, approaching its most negative level on record. Meanwhile, the liquidity contraction is accelerating: USDT supply has shrunk by around $870 million over the past 11 days, signaling this is not merely a lagged effect from prior redemptions. Stablecoins serve as the crypto market’s most direct source of available liquidity. Sustained USDT expansion typically coincides with stronger Bitcoin (BTC) price performance, while prolonged contraction phases often align with weak demand, market pullbacks, and declining risk appetite. That said, the correlation between USDT flows and BTC prices does not confirm a direct causal relationship—both may be jointly driven by risk aversion, with redemption pressure and spot sell-offs occurring simultaneously. The current BTC decline is not an isolated event; it is unfolding against the backdrop of shrinking liquidity from one of the crypto market’s primary sources, which also explains why recent market rebounds have failed to sustain. To improve the market environment, we need to see USDT’s 60-day market cap change stabilize, a slowdown in daily supply contraction, and a return to an expansion phase.