As USDT’s market capitalization fell by about $1 billion in five days, an analysis published on CryptoQuant warned that new liquidity accompanying Bitcoin’s recovery may not be enough.
Although Bitcoin continues to recover, USDT liquidity that could support buying is not strengthening at the same pace. According to the analysis, USDT’s 60-day market cap change recovered from its midyear lows toward zero, but the roughly $1 billion contraction over the past five days has begun to put that improvement to the test again.
How is this different from previous rallies?
During the strong rallies of 2024 and 2025, USDT’s market capitalization repeatedly grew by billions of dollars over 60-day periods. This expansion increased the dollar liquidity available for trading, making it easier for the market to absorb selling.
In 2026, however, expansion has been more intermittent and punctuated by sharp contractions. Bitcoin’s price recovered faster than USDT did. The analysis suggests that this divergence could leave the market more dependent on existing buying power and other sources of demand.
Signals that could strengthen Bitcoin’s recovery
Easing selling pressure or existing capital flowing back into buying could push Bitcoin higher. But if the number of investors looking to take profits increases as the price rises, stronger demand may be needed to absorb that selling.
The analysis recommends watching for three developments: an end to daily USDT contractions, a clear move into positive territory for the 60-day change, and stronger spot buying. It notes that if USDT’s supply continues to shrink while Bitcoin remains range-bound, the recovery risks losing momentum before enough demand emerges to absorb new selling.
USDT data shows only part of the liquidity picture. Funds shifting to other stablecoins and inflows into Bitcoin ETFs can provide demand through other channels. Therefore, the contraction over the past five days should not be interpreted as an equal amount of money leaving the entire crypto market.
Not investment advice.