Bitcoin traders have increasingly looked to stablecoins for clues about where risk appetite is headed. A new data review from CryptoQuant highlights that Tether’s USDT has been shrinking in market value at an unusually fast pace—yet the same patterns in past bear markets suggest the selloff may be approaching its end.
According to CryptoQuant, USDT’s 60-day rolling market-cap change averaged about minus $4.88 billion as of Aug. 10, while the most recent 11-day window saw nearly $870 million of USDT supply disappear. The combination points to a liquidity retreat that typically pressures broader crypto performance, but it also aligns with the late-stage behavior of prior downturns.
Key takeaways
- CryptoQuant reports USDT’s 60-day market-cap contraction remains near $4 billion, one of its sharpest declines on record.
- Nearly $870 million of USDT supply vanished over the latest 11-day period, indicating the contraction is actively continuing.
- The steepest 60-day contraction phase previously peaked around July 13 at approximately minus $5.72 billion.
- CryptoQuant argues that the worst stablecoin drawdowns have historically occurred near exhaustion points rather than at the beginning of further acceleration.
- Weekly RSI divergence arguments from analysts like William Clemente echo a broader “late bear-market” narrative.
USDT contraction tightens crypto liquidity
In a CryptoQuant blog post published last week, the onchain analytics firm described USDT as undergoing “one of its sharpest contractions on record.” The emphasis is not just on the overall size of the decline, but on whether the process is still worsening.
CryptoQuant notes that the deterioration has accelerated “at the margin,” pointing to about $870 million in USDT disappearing over the latest 11-day period. It also frames the 60-day market-cap change metric as a way to gauge sustained redemption pressure rather than one-off redemptions.
From a market mechanics perspective, stablecoins often function as a bridge for capital across exchanges and trading pairs. When USDT supply contracts, liquidity can become less available, reducing the “dry powder” investors might use to buy dips—or to rotate into other risk assets.
CryptoQuant cautions, however, against assuming a clean cause-and-effect relationship between stablecoin flows and Bitcoin’s spot price. In its view, both can respond to the same broader risk-off conditions: redemptions may accelerate alongside spot selling, rather than predictively preceding it.
“The caution is that correlation between USDT flows and BTC price doesn’t settle causality,” CryptoQuant analysts said. They added that sustained USDT expansion has historically coincided with stronger Bitcoin price regimes, while prolonged contractions have aligned with weaker demand and deeper corrections.
Late-stage bear-market behavior, not necessarily a fresh leg down
The key analytical question for traders is whether the USDT drawdown is merely “history repeating” or whether it signals a new intensification of selling pressure. CryptoQuant’s answer leans toward the former.
Historically, the firm argues, the most pronounced phases of USDT contraction tend to occur toward the final chapters of macro downturns, when selling momentum begins to move closer to exhaustion than to further acceleration. In that framework, severe stablecoin redemptions become less a signal to short the next day and more an indicator that the market has already been tested heavily.
CryptoQuant also highlights a specific milestone in the recent contraction cycle: the steepest 60-day decline in USDT market cap completed on July 13, when it reached about minus $5.72 billion. That point matters because it offers a reference level for where “worst-case” pressure may have already been seen—meaning later readings could represent stabilization or easing rather than escalation.
Still, the data in the CryptoQuant update is not painting a picture of immediate normalization. The latest 60-day average remains close to the multi-billion-dollar contraction zone, suggesting liquidity conditions are tight even if selling intensity may be moderating at the margin.
RSI divergence arguments reinforce a “bottoming” thesis
While stablecoin contractions speak to liquidity and risk appetite, technical market indicators often shape how traders interpret timing. The CryptoQuant findings have added momentum to broader “late bear market” narratives, including comparative analysis that points to earlier cycle behavior.
Cointelegraph has reported that some market participants are increasingly aligning with the idea of a new Bitcoin macro bottom forming before the end of 2026, even if the near-term trend remains volatile. In the same broader discussion, independent analyst William Clemente has argued for a cautious “cheap but not done yet” view.
On Aug. 8, Clemente posted on X that he considers Bitcoin “cheap,” while allowing for the possibility of “a leg lower” at some point during the year. Two days later, he highlighted what he described as a bullish divergence between BTC/USD and the relative strength index (RSI) on weekly time frames.
That divergence is widely treated as a leading indicator in technical analysis—particularly because the strongest RSI divergence signals historically appeared during turning points, including at the end of the 2022 bear market. In Cointelegraph’s earlier coverage, RSI divergence was framed as a “classic” reversal signal that coincided with the conclusion of that drawdown cycle.
What to watch next: stablecoin flows and confirmation signals
If CryptoQuant’s interpretation is correct, the most concerning USDT drawdown phases may already have passed their peak, even if contraction continues in the background. For investors and traders, the practical question is whether the contraction rate keeps accelerating or whether it begins to flatten—especially relative to the steepest reading around July 13.
In the coming weeks, market watchers may want to track whether USDT’s 60-day market-cap change continues near minus $4 billion or starts moving toward less negative territory, as well as whether BTC’s technical picture—such as the weekly RSI divergence narrative—gets reinforced by actual trend stabilization rather than only indicator hints. The stablecoin/liquidity story may not be the sole driver of price, but it can shape how quickly the market regains the ability to absorb dips and rebuild demand.
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