Tether’s (USDT) circulating supply has long been a subject of intense speculation regarding its potential impact on the price of Bitcoin.

Recent findings from CryptoQuant suggest a significant correlation between the supply of USDT and movements in Bitcoin’s price, particularly since the latter part of 2022.

USDT Influx Fuels Bitcoin Surge

The analysis indicated that the circulating supply of USDT has surged by approximately 30 billion, with each surge traditionally coinciding with a positive impact on Bitcoin’s price trajectory. This trend suggests that the influx of USDT supply tends to stimulate growth in the value of Bitcoin, indicating improved liquidity in the market.

The increase in USDT supply has been accompanied by a surge in Bitcoin’s price, reflecting heightened investor interest and anticipation surrounding factors like the potential introduction of a spot Bitcoin ETF. This data analysis highlighted the strong correlation between USDT supply dynamics and fluctuations in Bitcoin’s price, contributing to a more dynamic and voluminous trading environment for the cryptocurrency.

“Data analysis reveals a high correlation between USDT supply and Bitcoin price movement, leading to an increase in volume and a dynamic environment for the Bitcoin price.”

Correlation between USDT circulating supply and Bitcoin’s price

“Since the end of 2022, the circulating supply of $USDT has increased by around 30B. Each increase in supply has traditionally positively affected the development of the $BTC price.”
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— CryptoQuant.com (@cryptoquant_com) January 29, 2024

As such, an increase in USDT supply could typically correspond to a rise in Bitcoin price, and conversely, a decrease in USDT supply often coincides with a decline in Bitcoin price.

Additionally, there appears to be a delay of approximately one month between changes in USDT supply and corresponding changes in Bitcoin price, implying that shifts in USDT supply may serve as a leading indicator for future trends in Bitcoin’s price.

USDT’s Growing Dominance

USDT has maintained its position as the dominant stablecoin in the market, nearing a total asset value of $100 billion after experiencing remarkable growth over the past six years. Since the start of 2018, its market capitalization has skyrocketed by an astonishing 6,560%.

Paolo Ardoino, the CEO of the stablecoin issuer, attributed this success to a strong performance in the fourth quarter. Meanwhile, USDT has been capitalizing on high yields from US Treasury bills and allocating a portion of its profits towards purchasing Bitcoin.

The findings are interesting, given that Bitcoin halving years and those that follow have historically been very bullish for BTC.