Tether USDT on a Second Consecutive Month of Declining Market Cap 

Tether (USDT) is on pace for a second consecutive month of declining market cap in early 2026. In January, USDT experienced a slight decline, with reports citing a drop of around $1.2 billion in market cap and supply.

Ongoing as of February: The circulating supply/market cap has fallen by approximately $1.5 billion so far this month, according to sources like Artemis Analytics via Bloomberg and others. This puts it on track for the largest monthly decline since December 2022; post-FTX collapse, when it dropped ~$2 billion.

Current market cap hovers around $183.5–183.7 billion; CoinMarketCap ~$183.61B, other trackers similar at ~$183.6B. Circulating supply ~183.6–183.9 billion USDT, price pegged near $1.00, so market cap ? supply.

Earlier peaks: Around $185–187 billion in early February and January highs, showing the downward trend. This marks a reversal from prior growth tied to pro-crypto sentiment post-2024/2025 events, with the 60-day supply change turning deeply negative -$3 billion, rare since 2022.

Meanwhile, the overall stablecoin market has grown slightly (2–2.3% in February to ~$304–307B), driven partly by gains in competitors like USDC up ~5% in some reports. Analysts link the outflows to factors like large holders and whales redeeming USDT, potential capital rotation, or reduced inflows amid market dynamics. It’s triggered rare signals last prominent during past bottoms, though rebounds could vary.

If the trend holds through month-end, February would confirm the back-to-back declines. The recent outflows from Tether (USDT)—with circulating supply and market cap declining by about $1.5 billion in February 2026 following a ~$1.2 billion drop in January—stem from a combination of factors.

Nansen data shows whale wallets (across 22 addresses) net-sold ~$69.9 million USDT in recent weeks, while “smart money” has been net sellers. Newer wallets have accumulated ($591 million), but large holders dominate the exits, often signaling de-risking or profit-taking amid market uncertainty.

Capital rotation within stablecoins: Much of the money isn’t fully exiting crypto. The total stablecoin market has grown ~2–2.3% in February to ~$304–307 billion, with USDC surging nearly 5% to ~$75.7 billion. This suggests shifts toward competitors like USDC (seen as more regulated/institutional-friendly), rather than broad capital flight.

Regulatory pressures, especially in Europe: The EU’s MiCA framework, fully implemented by late 2025, has restricted non-compliant stablecoins. USDT doesn’t fully align with MiCA requirements, leading major exchanges to delist or limit it for European users. This has reduced demand and prompted redemptions and outflows in the region.

Broader market dynamics and reduced demand: A crypto selloff has lowered need for stablecoin liquidity in margin trading, DeFi, and leveraged positions. Lower trading volumes and risk-off sentiment reduce USDT minting while boosting redemptions. Tether has also conducted large burns to handle redemptions and maintain the peg.

Other contributors point to potential institutional exits or reallocation; to fiat, bonds, or other assets during uncertainty. Daily outflows have spiked, with multiple days exceeding $1 billion in net removals. Importantly, USDT’s peg remains stable at ~$1, backed by reserves—no signs of de-pegging risk like in past crises.

The overall stablecoin ecosystem is still expanding modestly, indicating rotation rather than total exodus. Analysts view this as a liquidity contraction signal, often tied to bearish pressure or bottoms, though rebounds could follow if inflows return. For context, this contrasts with prior growth tied to pro-crypto sentiment; current trends reflect caution amid macro headwinds and regulatory shifts.