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FollowingOn July 7, Tether withdrew US$2.5 billion worth of USDT from the Ethereum network, and liquidity fell the largest since February.
This move marks the largest contraction in USDT supply since February this year. It also indicates a slowdown in stablecoin liquidity inflows-one of the latest signals of overall tightening in the stablecoin market.
Supply contraction and market data
After this transaction, USDT\'s total circulating supply fell to US$189.6 billion. Most of this supply is distributed on the Ethereum and TRON blockchain. As the issuer of the USDT stablecoin pegged to the U.S. dollar, Tether still dominates the overall circulation supply in the cryptocurrency field.
Recent developments show that the trend of the stablecoin market is not limited to USDT. According to Artemis, the number of active stablecoin addresses has dropped 36.2% in the past 30 days. During the same period, the average daily trading volume of stablecoins also fell sharply, with a drop of 47.5%. USDT\'s main competitor, USDC, also experienced a more significant outflow of liquidity last month.
Tether\'s destruction of US$2.5 billion in USDT on July 7 was the largest supply reduction since February.
This contraction in available supply suggests that recent price increases in the cryptocurrency market have relied more on the unwinding of short positions than on the entry of new liquidity into the space. Unless the supply of stablecoins rebounds significantly, broader and more sustainable growth of digital assets is expected to remain constrained.
Balance movements on TRON and Binance
The decline in USDT supply has also drawn attention to where liquidity is concentrated on major networks. In particular, USDT flows between Binance and TRON are seen as a key indicator of trading sentiment. July data showed Binance\'s USDT reserves on TRON have dropped to $806 million.
The slowdown in USDT transfers on Ethereum and TRON during May and June further confirms widespread evidence of shrinking liquidity in the crypto market. Binance\'s total stablecoin reserves remain at nearly US$39 billion and have not changed significantly over the past month.
USDT still dominates under use case differentiation
Although the $2.5 billion withdrawal is relatively small relative to the overall size of USDT, continued regulatory dynamics in Europe and the decision of some platforms to scale back support for USDT have put additional pressure on the token.
Artemis data shows that stablecoin transfer activity has dropped by 83% in the past 30 days. However, the total supply of stablecoins remains close to historical peaks, narrowing by only 1% in the past month. Previous cryptocurrency bull cycles were partly due to rapid growth in the supply of stablecoins, but current conditions suggest that available supply is flat or fluctuating horizontally.
As of July, USDT still plays a central role in cryptocurrency transactions, holding approximately US$99.98 billion on Ethereum and more than US$89 billion on TRON.
As of July, USDT is more widely used in commercial payments, while USDC has a larger share of the decentralized finance space. USDC has gained significant momentum due to its use in the Base Network\'s sustainable trading ecosystem, while USDT is most prominent in peer-to-peer payment scenarios.
