The fact that USDT market cap is shrinking is a good thing because it means that redemptions are working.

I see alot of people here losing their hair over the fact that the market cap of USDT is shrinking, when in reality the fact that the market cap is going down while the peg is being maintained and the curve 3pool is at healthy rates is actually a good thing.

This is because the only way for the market cap of USDT to go down is if users are able to redeem their USDT to tether in return for actual dollars.

One of the biggest fears regarding tether (at least in the early days) was that there wasnt a clear process by which an individual investor could redeem tether back into dollars. This latest activity shows that it is possible and happening.

Also, the contraction of USDT market cap stabilizes the LP balances in the curve pool and on CEXes which makes depegging actually considerably less likely.