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The crypto market’s liquidity engine is sputtering. Tether’s USDT just posted its steepest monthly supply drop in three years while Bitcoin slid below $65,000 over the weekend — and a fresh round of Trump tariffs is making sure the pain sticks around. Here is what is actually happening beneath the surface.
Tether Is Bleeding Out — But the Stablecoin Story Is Weirder Than You Think
USDT is on track for its worst monthly contraction since the FTX collapse in late 2022. Artemis Analytics data shows Tether’s circulating supply shrank by $1.5 billion in February alone, following a $1.2 billion decline in January. That is $2.7 billion in combined outflows from the single most important liquidity vehicle in crypto — the asset that settles the majority of derivatives, spot trades, and DeFi collateral across every major exchange.
Here is the weird part, though. The broader stablecoin market actually grew. DeFiLlama data shows total stablecoin capitalization climbed from roughly $300 billion to $307 billion in February, a 2.33% increase. So capital is not leaving stablecoins entirely — it is rotating. USDT lost 1.7% of its supply, Circle’s USDC dropped 0.9%, but newer entrants are picking up the slack. The most eye-catching winner is World Liberty Financial’s USD1, the Trump-linked stablecoin, which expanded its market cap by 50% over the past month to $5.1 billion. BlackRock’s BUIDL tokenized fund surged 23% to $2.36 billion.
What does this mean for actual trading conditions? When USDT contracts, order book depth on exchanges thins out. Less deployable cash means bigger price swings on smaller volume. And that is exactly what happened over the weekend.
The Weekend Crash: From $67,600 to $64,300 in Hours
Bitcoin was sitting around $67,600 late on Saturday, February 22, looking relatively calm after a modest mid-week bounce. Then it dropped off a cliff. By Sunday morning BTC had plunged to $64,300, its lowest level since the brutal deleveraging event on February 5–6 when the price briefly touched $60,000. Over $460 million in leveraged long positions got liquidated within hours, with 92% of the damage hitting bulls. The Crypto Fear and Greed Index crashed to 14 — deep in extreme fear territory.
The trigger was not some mysterious whale dump. On February 20, the U.S. Supreme Court struck down the Trump administration’s use of emergency powers to impose broad global tariffs. The administration’s response came fast — by Saturday, February 22, the White House announced it would invoke Section 122 of the 1974 Trade Act to raise the global tariff rate from 10% to 15%. Markets had barely processed the Supreme Court ruling before getting hit with an escalation. Bitcoin, which has been trading like a high-beta risk asset through its five-month losing streak, reacted the way high-beta risk assets do when tariff fears spike — it sold off hard.
On-chain data made the selling pressure even more obvious. The exchange whale ratio hit its highest level since 2015, according to CryptoQuant, meaning the top 10 deposits accounted for 64% of all exchange inflows. Translation: the big players were the ones dumping, not retail panic sellers.
Trump’s Crypto Empire Keeps Building Anyway
Against this backdrop of thinning liquidity and crashing prices, the Trump family’s crypto ambitions are not slowing down one bit. On February 18, World Liberty Financial announced a partnership with BlackRock-backed Securitize and London-listed DarGlobal to tokenize loan revenue interests tied to the Trump International Hotel and Resort in the Maldives. The resort — a luxury development featuring roughly 100 beach and overwater villas scheduled for completion in 2030 — will not sell equity tokens. Instead, accredited investors will be able to purchase tokens tied to fixed yields and loan revenue streams from the development financing.
The announcement was made at the World Liberty Forum at Mar-a-Lago, where speakers included Goldman Sachs CEO David Solomon, Coinbase CEO Brian Armstrong, and Binance co-founder CZ — an event that pitched the vision of “the dollar, upgraded” to a room full of finance heavyweights. The tokens will be issued under Regulation D private placement rules, limited to accredited investors, with transfer restrictions that keep this firmly in institutional territory.
The timing raises obvious questions. Launching a tokenized real estate product while the broader crypto market is hemorrhaging liquidity takes some serious conviction — or at least serious indifference to market conditions. Eric Trump called it the first of many tokenization projects, but for those offerings to find buyers, the stablecoin plumbing needs to actually work. And right now, the plumbing is leaking.
What Comes Next
The macro setup heading into March is not encouraging. U.S.–Iran tensions are simmering, with Trump signaling a decision on potential military action within days. The 15% tariff rate under the Trade Act adds inflationary pressure that makes Fed rate cuts less likely — bad news for an asset class that thrives on liquidity expansion. Bitcoin ETFs have already bled $4.5 billion in 2026, with five consecutive weeks of outflows according to SoSoValue, and the Fed’s recent $18.5 billion repo injection did nothing to improve crypto sentiment.
The stablecoin rotation from USDT into newer products like USD1 and BUIDL might look like a positive signal for tokenization bulls, but it does not solve the core problem: the dominant trading stablecoin is contracting, exchange liquidity is thinner than it has been in years, and every macro shock lands harder because there is simply less cash sitting on the sidelines ready to buy dips. Until that changes, every bounce is going to get sold and every weekend is going to feel dangerous.
