TLDR:

Tether’s market cap fell 0.8% in February to $183.61 billion, extending January’s 1% slide from a record high. 
The two-month contraction is the first since the 2022 TerraForm Labs collapse shook stablecoin confidence. 
Weak demand for U.S.-listed spot bitcoin ETFs and shrinking stablecoin supply cloud recovery prospects. 
USDC rebounded to nearly $75 billion from a January low but remains flat year-to-date amid broad stagnation.

Tether’s market capitalization has declined for a second consecutive month, dropping 0.8% in February to $183.61 billion.

This two-month contraction is the first since the 2022 TerraForm Labs collapse. The trend points to capital outflows from the crypto market.

Analysts warn this could weigh heavily on any chance of a sustained recovery in bitcoin and broader digital assets across the sector.

Tether Contraction Raises Red Flags for Crypto Markets

Tether’s February decline extends January’s 1% slide from a record high of $186.84 billion. Data from CoinDesk confirms the back-to-back monthly drops.

This pattern has not been seen since the Terra collapse wiped out billions in investor wealth. That event shook confidence in stablecoins and sent shockwaves across the entire crypto market.

Stablecoins like Tether serve as the primary funding currency for crypto trading activity. They also enable capital movement across borders and support payments in many regions.

When stablecoin supply contracts, liquidity tightens across the broader market. Crypto analyst Rachael Lucas of BTC Markets addressed the concern directly on LinkedIn:

“Stablecoins are the fuel that powers crypto markets. When the fuel drains, everything slows down, and that is exactly what we are watching unfold.”

The ongoing outflows from Tether come alongside weak demand for U.S.-listed spot bitcoin ETFs. Both factors together cast doubt on the strength of any near-term recovery.

Bitcoin briefly surpassed $70,000 in mid-February before pulling back to around $65,000. The leading cryptocurrency has struggled to build momentum since its downtrend paused near $60,000 on February 6.

The situation reveals that crypto market sentiment remains fragile heading into late February. Investors appear cautious, and fresh capital inflows have been limited.

Without a reversal in stablecoin supply trends, analysts see limited fuel for a sustained rally. The market is watching closely to see if conditions shift in the coming weeks.

USDC Shows Resilience but Growth Remains Flat

USDC has shown more resilience than Tether through this period of market stress. The U.S.-regulated stablecoin recovered to nearly $75 billion after dipping to $70 billion in January.

However, its growth has largely stalled when measured against the start of the year. Year-to-date, USDC remains essentially flat despite the modest rebound in market value.

The stagnation in USDC growth mirrors the broader trend seen across major stablecoins. Even the more regulated and U.S.-compliant stablecoins are not attracting strong inflows.

This points to a market-wide pullback in risk appetite rather than issues specific to any one issuer. The overall stablecoin sector appears to be in a period of consolidation.

Traders and analysts continue to monitor stablecoin supply as a key indicator of market health. A sustained recovery in stablecoin market caps would likely signal renewed confidence.

Until that shift occurs, the broader crypto market may struggle to find direction. The coming weeks will be critical in determining whether this contraction extends further.

The post Tether Records Second Straight Monthly Decline as Stablecoin Growth Stalls Across Crypto Market appeared first on Blockonomi.

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Filed under: Bitcoin - @ February 25, 2026 11:21 am