The recent decline in the market cap of Tether (USDT) could simply be related to the seasonal holiday pause, states Matrixport, suggesting that the market might regain momentum shortly.
Let’s see all the details in this article.
The decrease in the market cap of USDT does not necessarily indicate a bear market?
The cryptocurrency market has closely observed the recent decrease in the market cap of Tether USDT, the largest stablecoin by capitalization.
From the peak of 141 billion dollars reached on December 19, 2024, USDT has experienced a decline of 2.8%, according to the data from CoinGecko.
In parallel, the daily trading volumes have decreased by 64%, dropping from approximately 154 billion dollars in mid-December to 55 billion dollars on January 6, 2025.
These numbers have raised questions among investors and analysts about the possible significance of this trend.
However, the crypto financial services platform Matrixport argues that it is premature to interpret this decline as a bear signal for the cryptocurrency market.
Matrixport published an analysis on the social network X on January 6, stating that the decline of USDT is likely the result of a slowdown in trading activities due to the Christmas holidays:
“Although Tether’s market capitalization has recently decreased and trading volumes have declined, it might be premature to turn bear. These trends could simply reflect the seasonal pause during the Christmas holiday period. With the start of the new year, it won’t be long before we see if the bull momentum of the market will resume.”
According to Matrixport, an increase in stablecoin trading volumes is generally a positive indicator for the cryptocurrency market, as it reflects a greater influx of fiat money into the digital ecosystem.
On the contrary, a decrease in these volumes could signal a phase of consolidation or a pause in the bull trend. However, the company emphasizes that the holiday season is historically a period of lower activity in the financial markets, including those of criptovalute.
Speculations on MiCA and community reactions
Not only Matrixport highlighted the influence of the holidays on the market.
Axel Adler, analyst at CryptoQuant, on January 4th observed that Bitcoin needs an increase in trading volumes to support a strong bull momentum, predicting that this could happen once the holiday period is over.
“The market needs to accumulate more trading volume for a significant movement”,
stated Adler, suggesting that the current calm could be temporary.
In the meantime, some rumors have linked the drop in the market capitalization of USDT to the full implementation of the European Union regulation on crypto-asset markets (MiCA).
Some online reports have suggested that European cryptocurrency exchanges would have to remove USDT from their platforms by December 30, 2024.
However, these statements have not been supported by official indications from the local regulatory authorities.
The European Securities and Markets Authority (ESMA), responsible for overseeing compliance with MiCA, has not provided specific comments on the status of USDT in relation to the new regulations.
The cryptocurrency community promptly reacted to these speculations, labeling them as FUD (Fear, Uncertainty, and Doubt – Paura, Incertezza e Dubbio).
Many members of the X platform have criticized the reports suggesting an imminent delisting of USDT from major European exchanges. An industry observer indeed wrote:
“All the ‘news’ about the delisting of Tether USDT from major global cryptocurrency exchanges due to the EU’s MiCA law were just FUD.”
The reality of the European market
Despite the rumors, USDT trading continued without significant interruptions in Europe. Exchanges like Binance have confirmed that USDT will remain available on their platforms until further notice.
At the end of 2024, Binance stated:
“We will continue to support USDT and closely monitor regulatory developments.”
The fact that Coinbase has delisted USDT is not directly related to European regulations, but falls within a series of strategic decisions by the exchange.
Other operators in the European market have not followed the same path, suggesting that there is no immediate regulatory pressure to remove USDT from trading platforms.
As we know, Tether USDT plays a crucial role in the cryptocurrency ecosystem as the main stablecoin used to facilitate exchanges and offer a haven from the typical volatility of the crypto market.
A temporary decrease in its market capitalization or trading volumes can affect liquidity dynamics. However, it does not necessarily indicate a fundamental change in market conditions.
Investor confidence in USDT remains strong, despite periodic concerns regarding the transparency of Tether’s reserves.
The company has undertaken several initiatives to improve transparency, including the publication of attestation reports of its reserves by independent auditors.