Tether's USDT, the world's largest stablecoin, experienced a significant supply contraction in February 2026. Its circulating supply fell to $183.7 billion, marking a 1.7% decline from January and representing the largest monthly drop since the FTX collapse in late 2022.
The reduction is attributed to redemptions outpacing new token issuances. Analysts point to several contributing factors, including Europe's MiCA (Markets in Crypto-Assets) regulations, a 23% decline in Bitcoin's price year-to-date, and investors rotating capital into alternative stablecoins like USDC or traditional financial assets. This shift indicates a potential period of risk-off sentiment and reduced trading activity within crypto markets.
Despite the supply contraction, which equates to billions of dollars leaving circulation, USDT's $1 peg has remained stable. Tether has emphasized that the stablecoin is backed by solid reserves, and the market has maintained confidence in its value. The event has drawn close scrutiny from traders and analysts, who monitor stablecoin liquidity as a key indicator of overall market health and investor sentiment.
