Tether (USDT) Signals Renewed Risk Appetite as $450M Flows into Exchanges, Can This Strengthen Bitcoin (BTC) Bid Support?

BTC price action has historically mirrored USDT supply trends. In mid-December, as BTC hit $108K (its then-all-time high), USDT's circulating supply also peaked at 140 billion.

Fresh inflows of $450 million Tether [USDT] into exchanges in February have sparked speculation about a renewed appetite for riskier assets. Could this influx of sidelined capital bolster bid support for Bitcoin [BTC] and propel it past the $100K resistance level?

BTC price movements have exhibited a historical correlation with USDT supply trends. In mid-December, when BTC surged to $108K (then its all-time high), USDT’s circulating supply also peaked at 140 billion.

However, a shift in momentum saw BTC retrace to $91K, coinciding with a 3 billion decline in USDT supply to 137 billion – indicating hedging activity.

Source: Glassnode

Interestingly, USDT supply has surged to a new all-time high of 141 billion, at press time, accompanied by fresh inflows into exchanges. If this capital rotation translates into spot demand, BTC could break past the $100K resistance level.

However, if a majority of it fuels leveraged trades instead of actual buying, it could create a liquidity trap. In this scenario, prices rise temporarily but lack real support, leading to a sharp reversal as overleveraged positions close.

Is USDT fueling genuine demand or just leverage?

Since BTC’s last attempt to breach $100K, the Estimated Leverage Ratio (ELR) has been climbing, posting higher highs.

Meanwhile, BTC inflows to exchanges are higher than outflows, indicating weak spot demand. With more leverage in play, BTC faces a higher risk of long liquidation cascades if prices drop.

Source: CryptoQuant

Despite BTC’s recent recovery, several key metrics, including the Market Fear and Greed Index, Unrealized Net Profit/Loss, and BTC ETF holdings, suggest a bearish market structure.

Moreover, the surge in USDT inflows isn’t necessarily bullish for BTC yet. Instead, rising leverage and weak spot demand increase the risk of long liquidation cascades, making BTC’s price action more fragile in the short term. Caution is advised.