Bitcoin faces liquidity test as stablecoin supply contracts significantly

Bitcoin faces a fresh liquidity squeeze as mounting losses among recent buyers threaten to derail its recovery. The broader market downturn has left the leading cryptocurrency vulnerable to another decline toward $70,000, with investors who purchased at higher prices potentially adding to selling pressure if a recovery fails to attract fresh capital.

According to a November report by Glassnode, the aggregate supply of dollar-linked tokens declined by $14.2 billion over a 30-day period, marking the fastest contraction since the 2022 market crisis. This finding corroborates earlier research from CryptoQuant, which showed that Tether's USDT lost $6.6 billion in market capitalization over 60 days. This retreat represents a sharp reversal from the liquidity expansion of the previous two years, where USDT supply growth had peaked significantly.

Bitcoin apparent demand falls

Alongside the stablecoin contraction, Bitcoin apparent demand has deteriorated rapidly. CryptoQuant data indicates that the apparent demand indicator fell to negative 284,000 BTC over 30 days, hitting its weakest reading since late March 2025. This downward pressure has coincided with persistent institutional selling and a broader withdrawal of dollar liquidity. Specifically, US spot Bitcoin exchange-traded funds recorded $1.6 billion in net outflows across 20 trading sessions, while the Coinbase Premium Index remained negative for 30 consecutive days.

Bitcoin faces mounting liquidity pressures as stablecoin contractions and falling apparent demand threaten market recovery.

This combination leaves Bitcoin increasingly dependent on buyers willing to absorb supply without the additional support previously provided by expanding stablecoin issuance and ETF inflows. Furthermore, investors who entered the market during the August and September rally are now holding their assets at a loss. CryptoQuant data shows that the unrealized profit margin for coins held for one to three months collapsed from 33% in late September to negative 6%, leaving these investors with an average acquisition price near $79,500.

Why it matters

The ongoing liquidity contraction and shifting profitability margins alter the dynamics for market participants holding assets near previous acquisition highs. As short-term holders face mounting unrealized losses, potential recoveries toward breakeven levels could trigger additional selling pressure across global crypto markets.