Tether removed $2.5 billion in USDT from circulation on Ethereum, marking the largest supply reduction since February

On July 7, Tether withdrew $2.5 billion worth of USDT from circulation on the Ethereum network. This move marks the largest contraction in USDT supply since February, signaling a slowdown in stablecoin liquidity flows — one of the latest indications of tightening conditions across the stablecoin market.

Supply contraction and market data

Following this transaction, USDT’s total circulating supply fell to $189.6 billion. The majority of this supply is distributed across the Ethereum and TRON blockchains. Tether, as the issuer of the US dollar-pegged stablecoin USDT, remains the dominant player in terms of overall circulating supply within the cryptocurrency sector.

Recent developments show that stablecoin market trends extend beyond just USDT. According to data from Artemis, the number of active stablecoin addresses dropped by 36.2% over the past 30 days. Daily average stablecoin transaction volume also declined sharply, falling by 47.5% in the same period. USDC, USDT’s main competitor, saw more pronounced outflows of liquidity in the last month as well.

This contraction in available supply suggests that recent upwards price moves in crypto markets have relied more on the closing of short positions than on fresh liquidity entering the sector. Unless a notable rebound in stablecoin supply transpires, broader and more sustainable growth across digital assets is expected to remain constrained.

Shifting balances on TRON and Binance

The reduction in USDT supply also brings into focus where liquidity on major networks is consolidating. In particular, USDT flows between Binance and TRON are closely watched as key indicators of trading sentiment. Data for July shows Binance’s USDT reserves on TRON dropping to $806 million.

The slowdown in USDT transfers on both Ethereum and TRON during May and June reinforces broader evidence of liquidity contraction in crypto markets. Binance’s total stablecoin reserves have held near $39 billion, with no significant change observed on this front in the past month.

USDT remains dominant as use cases diverge

While the $2.5 billion removal is relatively modest given USDT’s overall scale, ongoing regulatory developments in Europe and decisions by some platforms to pare back USDT support have added to the pressures on the token.

Artemis data highlight an 83% drop in stablecoin transfer activity over the last 30 days. However, total stablecoin supply remains close to its historic peak, narrowing only 1% in the past month. Previous crypto bull cycles were fueled in part by rapid growth in stablecoin supply, but current conditions suggest flat or sideways movement in available supply.

As of July, USDT remains more widely used for commercial payments, while USDC is carving out a larger presence in the DeFi (decentralized finance) landscape. USDC gains particular momentum from its use in perpetual trading ecosystems on the Base network, whereas USDT is most prominent in peer-to-peer payment scenarios.

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