Analysts Sound Alarm as Tether Dominance Hits Two-Month High

Tether Dominance (USDT.D) tracks the share of USDT in the overall crypto market capitalization, making it a key—yet often overlooked—indicator of market sentiment. A falling USDT.D generally signals that traders are deploying stablecoins to buy Bitcoin and altcoins, fueling rallies. Rising dominance, however, reflects a move back into stablecoins, often associated with risk aversion and potential downside pressure.

Warning Signals From September

According to TradingView data, USDT.D climbed to 4.69% during the final week of September, its highest level in two months. Analysts see this breakout as a sign that investors are becoming increasingly cautious, with some warning it could climb above 5%—a level historically linked to sustained bearish phases.

Market analyst Jason Pizzino described the move as “the breakout no crypto bull wants to see,” cautioning that a sustained push higher could mark a trend reversal. Still, he remains hopeful for a rejection at current levels.

Technical vs. Fundamental Drivers

Much of the bearish outlook is based on technical patterns, with resistance levels guiding forecasts. But fundamentals paint a more complex picture. USDT reserves on exchanges are at record highs, net inflows continue to climb, and Tether has expanded its issuance to meet growing demand. These factors suggest strong latent buying power, waiting to be deployed into the market.

Max, founder of BecauseBitcoin, noted that “perfect negative correlation between USDT.D and $TOTAL implies one more sweep of the lows,” but warned against panic selling, arguing that markets may be close to setting a long-term swing low ahead of a bullish Q4.

Market at a Crossroads

The September downturn has intensified debate over whether recent weakness represents a bear trap or the start of a broader correction. Analysts agree that USDT.D should not be assessed in isolation. Instead, it must be combined with other market indicators to form a more reliable outlook and reduce risk.