Tether’s USDT just posted a $1.5 billion supply drop in February, marking the largest monthly decline since the aftermath of the FTX collapse in December 2022. The circulating supply slid to roughly $183.7 billion as of February 19, down from a $187 billion peak in early January, according to Artemis Analytics data reported by Bloomberg.
But here’s what makes this interesting. The money isn’t leaving stablecoins. It’s leaving Tether.
The total stablecoin market actually grew to $304.6 billion in February, up from $302.9 billion at the end of January. Circle’s USDC climbed nearly 5% to $75.7 billion during the same stretch. Redemptions are outpacing new USDT issuances, and the capital appears to be rotating rather than exiting.
Three forces are working against Tether right now.
A broader crypto selloff that erupted in October has wiped out $2 trillion in market value, shrinking demand for stablecoin liquidity. Europe’s MiCA regulations are pressuring exchanges to restrict non-compliant stablecoins.
And Bitcoin’s decline this year is reducing the leverage and trading activity that drives USDT demand.
In 2025, total stablecoin transaction volumes hit $33 trillion. USDC accounted for $18.3 trillion of that total, while USDT recorded $13.3 trillion. Circle’s stablecoin is now processing more volume than Tether despite having less than half the market cap.
U.S. support for stablecoins has also fueled new competition. World Liberty Financial, one of the Trump family’s crypto ventures, launched its USD1 stablecoin in March 2025 and has rapidly scaled.
Context matters. The February decline is a 0.8% drop. In 2022, USDT saw contractions of 13%, 9%, and 6% in consecutive months. USDT’s $1 peg remains stable and reserves appear intact.
Still, the stablecoin landscape is shifting. Tether’s dominance, once unquestioned, is now being tested on multiple fronts.
Whether this is a temporary liquidity adjustment or the start of a structural rotation will depend on how aggressively MiCA enforcement tightens and whether institutional capital continues favoring regulated alternatives.
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