Tether’s USDT is seeing its sharpest monthly contraction since December 2022, with circulating supply down roughly $1.5 billion since the start of February. The decline stands out because the broader stablecoin market has not been falling over the same period.
A drop in USDT supply typically reflects net redemptions rather than trading activity. When large holders exchange USDT for dollars, the issuer removes the redeemed tokens from circulation on a one-for-one basis. By contrast, selling USDT on an exchange does not reduce supply, as the tokens continue to exist and simply change hands.
The February move comes as USDC has been expanding. USDC supply has risen to roughly $75.7 billion, up close to 5% since early February, while USDT has slipped to around $183 billion. Another large stablecoin, USDS (Sky), has also grown, reaching over $6.8 billion.
Why Traders Watch USDT Supply
Market participants are watching the divergence because stablecoin supply is commonly used as a proxy for liquidity on crypto rails. USDT is widely used for transfers and settlement across venues, while USDC tends to be more prominent in DeFi flows, where transaction activity can remain elevated even during risk-off periods.
In percentage terms, the USDT decline is still modest of roughly 0.8% from around $185.2 billion, but the size of the monthly contraction is notable compared with recent history.
