Tether’s USDT dip in market cap due to lackluster trading activity during the holiday season

Tether USDT saw its sharpest market cap decline over the December holiday season, translating to a multi-billion U.S. dollar loss. Matrixport, however, recently pointed out that the short-term drop in market cap and trading volume did not indicate a bearish turn on markets. 

A Matrixport chart released today revealed a dip in Tether USDT’s market cap, reflecting lowered trading volume during the holiday season. The decline of USDT was also influenced by issues related to MiCA law compliance, which resulted in the stablecoin’s delisting from some European exchanges. As a result, XRP has flipped Tether’s USDT to become the third-largest cryptocurrency by market cap.

In its ‘Chart of the Day: Stablecoin Trend’ report, Matrixport stated that it was premature to conclude that the stablecoin market had turned bearish, pointing out that the occurrence would not last long. According to the crypto service provider, an increase in stablecoin issuance could act as a bullish signal, indicating buying pressure in the market. A decrease in stablecoin holding or issuance could also be interpreted as a decline in crypto asset demand.

Seasonal lull and MiCA laws misinformation lead to USDT losses 

#Matrixport Today 📉 – Jan 6: #Stablecoin Trends: A Key Indicator for #Crypto Market Momentum in 2025#cryptomarket #MarketTrends #MarketInsights #CryptoInvesting #BTC #ETH pic.twitter.com/MOUwe85sMP

— Matrixport Official (@Matrixport_EN) January 6, 2025

Tether’s USDT’s market cap declined by more than 2.8% in the past week due to reduced trader activity over the Christmas holiday. Coingecko’s data showed that USDT’s market cap was currently at $137.2 billion, down from its December peak of $141 billion. Daily trading volume also fell 64% from mid-December’s $155 billion to $55 billion as of January 6, 2024. The declining market cap and trading volume can also be partly attributed to the impact of delisting USDT from several EU-based exchanges due to MiCA compliance issues. The recent drop in USDT represented the largest loss since November 2022.

Karen Tang, head of APAC partnerships at Orderly Network, and social media analyst Axel Bitblaze were among the experts who dismissed fears of USDT’s disruption by MiCA. They emphasized USDT’s dominance in the U.S. and Asia markets, noting that 80% of USDT’s trading volume occurred in Asia. Bitblaze pointed out that the MiCA deadline did not mean that European customers could not hold USDT. 

Bitblaze also stated that much misinformation was being spread about USDT’s illegality in the EU. The analyst said it was okay for EU customers to hold USDT in non-custodial wallets and even use it to trade on DEXs. The only restriction was that EU customers could not use USDT to trade on MiCA-compliant exchanges. Bitblaze added that the ~$55 billion daily USDT trading volume suggested a less severe impact of USDT delisting in EU exchanges. 

Tang argued that the delisting of USDT from EU exchanges could hinder the Eurozone itself by slowing digital assets innovation due to ‘overly restrictive regulations.

Crypto community slams FUD around MiCA and Tether

The crypto community reacted to earlier reports linking USDT’s market drop with the full implementation of MiCA regulations as Binance announced the continued support of USDT until further notice. Community members like Quinten Francois slammed the reports on USDT’s delisting from EU exchanges, labeling them as FUD (fear, uncertainty, doubt). 

Another industry observer, Nostradamus, also reiterated that all the news about the Tether USDt delisting from major global crypto exchanges due to the EU MiCA law was just FUD.

Matrixport predicted that stablecoin bullish momentum could resume soon, stating that an increase in stablecoin trading volume was usually a bullish signal for the crypto market. The crypto service provider added that this increase in trading volume reflected more fiat money flowing into the ecosystem, suggesting investor confidence. 

Tether fought back against MiCA restrictions by investing in EU-based companies like Quantoz and StablR to maintain a hold of the European market. Paulo Ardoino, Tether’s CEO, has repeatedly assured EU customers that the company had no plans to exit the EU market. He, however, reminded EU customers to use non-custodial wallets as a workaround for now.

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