Tether (USDT), the world's largest stablecoin, has recorded its second consecutive monthly decline in market capitalization, falling 0.8% in February 2026 to $183.61 billion. This marks the first back-to-back monthly contraction since the collapse of the Terra-LUNA ecosystem in May 2022, signaling a notable shift in stablecoin momentum and potential tightening of liquidity conditions across the cryptocurrency ecosystem.
The February decline follows a 1% drop in January from USDT's all-time high of $186.8 billion. Over these two months, approximately $3 billion in USDT supply has exited circulation. Analysts point to several potential drivers for this contraction, including regulatory pressure tied to Europe's Markets in Crypto-Assets (MiCA) framework, which has led to restrictions and delistings on certain platforms. Additionally, shrinking stablecoin supply is often interpreted as capital leaving the crypto market or institutional redemptions increasing during risk-off conditions.
Despite the contraction, Tether's dollar peg remains stable, and the company's reserves appear intact. As of January 2026, Tether's reserves included approximately 148 tonnes of gold valued around $23 billion.
Meanwhile, USD Coin (USDC) has shown a partial recovery, rebounding from January lows to approximately $75.3 billion by late February. However, year-to-date growth has remained largely flat, suggesting a broader stall among major stablecoins. Some analysts attribute this slowdown to regulatory uncertainty in the United States, including delays surrounding proposed legislation such as the Clarity Act. Nevertheless, USDC continues to maintain strong institutional positioning, potentially supported by evolving SEC guidance favoring more transparent and regulated stablecoin structures.
The overall stablecoin market remains historically elevated, with total market capitalization estimated between $300 billion and $320 billion as of February 2026—well above 2024 levels. USDT still commands a dominant 60.64% share of the total stablecoin market, reinforcing its position as the primary liquidity vehicle in crypto. Meanwhile, emerging competitors like World Liberty Financial's USD1 have reportedly expanded their market value by roughly 50% in early 2026, highlighting shifting dynamics within the sector.
Market observers note that stablecoin supply trends are often viewed as a proxy for crypto liquidity. Consecutive declines in USDT supply may indicate cautious capital flows and reduced risk appetite in the short term. However, with overall stablecoin capitalization still elevated and long-term projections from major banks suggesting significant future expansion, the current slowdown may represent consolidation rather than structural decline.
