- Tether market cap decline marks a second straight monthly drop, echoing the 2022 Terra crisis period.
- U.S. spot Bitcoin ETFs recorded $3.8 billion in five weeks of net outflows since January 20.
- Tether increased gold reserves to 148 tonnes, worth $23 billion, to reinforce collateral strength.
Tether’s market capitalization is on a second consecutive month decline as liquidity conditions across digital asset markets tighten. Bitcoin ETF outflows and slow growth in stablecoins have raised questions about capital rotation within crypto.
Tether Market Cap Decline Extends Rare Contraction
Tether market cap decline saw supply fall to $183.61 billion in February. The figure dropped from January’s record $186.84 billion.
This marks a rare two-month contraction not seen since 2022. The previous comparable contraction followed the collapse of TerraForm Labs.
That event erased billions and weakened confidence in stablecoins. Market participants now track similar stress signals in liquidity flows.
Stablecoins function as primary settlement tools for crypto trading activity. Therefore, shrinking supply often signals capital exiting exchanges.
Exchange reserves have also trended lower during this period.
ETF Outflows Add Pressure to Bitcoin
The Tether market cap decline coincides with outflows from U.S.-listed spot Bitcoin ETFs. Data shows $3.8 billion exited these funds over five consecutive weeks.
The streak that began on January 20 and persisted through late February had inflows of about $54 billion since launch. However, altcoins like Solana and XRP have seen modest inflows.
This reflects selective positioning and not broad market expansion. Market observers have pointed to social media commentary from analysts tracking ETF flows.
Several noted on X that sustained outflows reduce available liquidity for Bitcoin accumulation. However, aggregate ETF assets remain historically elevated.
Gold Allocation Strategy Gains Attention
Amid the Tether market cap decline, the company expanded its bullion reserves. Holdings reached 148 tonnes as of January 31, 2026.
The gold position carries an estimated value of $23 billion. Chief Executive Paolo Ardoino confirmed the allocation strategy in recent public remarks.
He stated that up to 15% of Tether’s investment portfolio may shift into bullion. The move positions Tether among the largest private gold holders globally.
This development comes as stablecoin growth across competitors also slows. USD Coin recovered from $70 billion in January to nearly $75 billion.
However, year-to-date expansion remains flat as Liquidity trends remain central to determining market direction.
Historically, Stablecoin issuance has aligned with trading demand and risk appetite. When supply contracts, trading volumes often moderate across exchanges.
For now, analysts continue monitoring whether stablecoin balances stabilize in the coming weeks. A substantial reversal requires renewed ETF inflows and stronger Bitcoin demand.