Tether’s Record Supply and Depegging Fears: Stablecoin Stress Test or Systemic Red Flag?

If you want to know how much conviction is left in the crypto market, look at Tether. Not the price chart, the circulating supply. As of February 5, 2026, Tether’s supply has hit an all-time high, even as the rest of the crypto complex is busy impersonating a lemming on a cliff. Bitcoin’s below $70,000, altcoins are in open revolt against their own market caps, and the only thing going up is the number of Tethers in existence. But here’s the catch: USDT’s peg is starting to wobble. Again.

This is not the first time the market has flirted with the idea of a Tether depeg. But the context now is different. The crypto market is in a full-blown risk-off mode. Bitcoin is down more than 50% from its cycle highs, according to Coinpedia, and capitulation metrics are flashing forced selling across all wallet cohorts. Altcoins are getting trampled. Even the privacy sector, once the darling of the anti-surveillance crowd, is down 25% on regulatory pressure and exchange delistings. Yet Tether’s supply keeps climbing, crossing previous records as if the music never stopped. Coinspeaker reports that Tether has celebrated several milestones, but the undercurrent is unmistakable: USDT has seen some unpegging recently. The question is whether this is the usual noise or a sign of real stress in the system.

Let’s talk numbers. Tether’s circulating supply now sits at an all-time high, with the company trumpeting the milestone just as the broader market is bleeding out. Bitcoin’s drop below $70,000 has triggered the biggest sell-off since October 2025, with over 30,000 retail wallets capitulating, according to Cryptopolitan. Meanwhile, Cardano whales are adding, but long-term holder selling has collapsed by 99%, suggesting that even the true believers are running out of dry powder. In this environment, Tether’s relentless minting looks less like confidence and more like a last-ditch effort to keep liquidity flowing. The market is watching for any sign that USDT can’t hold its peg. If that happens, the entire crypto ecosystem gets a stress test it might not survive.

Historically, Tether depegs have been short-lived. The market shrugs, arbitrageurs step in, and the peg snaps back. But this time, the macro backdrop is uglier. Crypto venture capital is drying up, with major firms pivoting away and half of Paradigm’s team departing in two months, according to Benzinga. The narrative that “crypto as we know it is over” is gaining traction, and not just among the usual skeptics. Even the altcoin crowd is feeling the pain, with Shiba Inu plunging to $0.0000063588 over a single weekend, wiping away months of gains. The privacy coin sector is in freefall, and the only thing not collapsing is Tether’s supply. That’s not a bullish signal. It’s a warning.

The real story here is not just about Tether’s peg. It’s about what happens when the last pillar of crypto liquidity starts to look shaky. Tether has always been the industry’s dirty little secret: a stablecoin that is only as good as the market’s willingness to believe in it. When everything else is selling off, and the only thing growing is Tether’s supply, you have to ask who is on the other side of those trades. Are new entrants really buying USDT to deploy into a crashing market, or are market makers and exchanges simply recycling collateral to keep the game going? If the latter, the risk of a sudden, violent depeg rises exponentially.

The technicals don’t offer much comfort. The broader crypto market is in a bearish phase, with Bitcoin giving up more than half its value from the highs. All wallet cohorts are selling, and the forced selling signal is flashing red. Even the whales are not immune. Cardano’s big holders are adding, but the price action suggests more pain ahead. Meanwhile, Tether’s peg is holding for now, but the cracks are visible. Small deviations from $1 have been noted on major exchanges, and the usual arbitrage flows are thinner than usual. If the market loses faith in Tether, the unwind could be brutal.

Strykr Watch

Traders should keep a laser focus on the USDT/USD peg, especially on high-volume exchanges like Binance and Coinbase. Any sustained break below $0.995 would be a red flag. Watch for spikes in Tether’s 24-hour trading volume, as these often precede volatility events. On the crypto majors, $BTC needs to reclaim $70,000 to avoid a deeper slide toward the $60,000 psychological level. For altcoins, the privacy sector is in freefall, with Monero and ZCash both down 25%. Cardano’s inflection point is around $0.45, if it breaks, expect another leg lower. The broader market is oversold, but forced selling can always get more forced before it’s done. RSI readings are deep in the red zone, but that’s been true for weeks.

The bear case is straightforward. If Tether’s peg breaks, even briefly, it could trigger a cascade of liquidations across the entire crypto ecosystem. Exchanges rely on USDT as the primary source of liquidity, and a depeg would force market makers to pull back, widening spreads and increasing volatility. The risk is amplified by the lack of new capital entering the space. With venture funding drying up and institutional flows reversing, there’s nobody left to catch the falling knife. Regulatory pressure is another wild card. The privacy coin sector’s 25% crash is a reminder that regulators are not done with crypto, and any hint of a Tether investigation could send shockwaves through the market.

On the flip side, there are still opportunities for traders who can stomach the risk. Arbitrageurs can profit from temporary depegs by buying USDT below $1 and redeeming for dollars, assuming Tether’s redemption window stays open. For the brave, buying panic in the majors, $BTC near $60,000, $ETH below $3,000, could pay off if the market stabilizes. But stops need to be tight. If Tether’s peg breaks hard, all bets are off. Some traders are looking at shorting altcoins that have yet to capitulate, betting that forced selling will spread. Others are eyeing stablecoin pairs for volatility spikes. The key is to stay nimble and watch the flows. When the market is this stressed, liquidity is both the problem and the opportunity.

Strykr Take

This is not the time to get cute. Tether’s record supply in the middle of a crypto crash is not a bullish divergence, it’s a warning shot. If the peg holds, the market will muddle through and maybe even stage a relief rally. If it breaks, the unwind will be fast and unforgiving. Strykr Pulse 38/100. Threat Level 4/5. The only thing you can trust in this market is your stop-loss.