According to the latest on-chain data, liquidity in cryptocurrency markets has reached an all-time high. Here is the implication of rising liquidity on Bitcoin price and its future trajectory.
Stablecoin Market Cap Reaches New Highs – Impact on Bitcoin Price
In its latest report, CryptoQuant revealed that liquidity in the crypto market reached an all-time high in late September, sparking talk of the Bitcoin bull market resuming. According to the on-chain analytics company, crypto market liquidity is measured by the coin’s stable value and market capitalization, which now stands at around $169 billion.
Data from CryptoQuant shows that the total market capitalization of major US dollar-backed stablecoins has increased significantly so far in 2024, increasing by 31% (the equivalent of $40 billion) year to date. However, most of the growth was sparked by the two largest stablecoins, Tether’s USDT and Circle’s USDC.
Source: CryptoQuant
Unsurprisingly, USDT and USDC continue to dominate the stablecoin sector, with market shares of 71% and 21%, respectively. According to data from CryptoQuant, the market cap of USDT increased by 30% in 2024 (around $28 billion), while the market cap of USDC increased by 44% (the equivalent of $11 billion). dollars) since the beginning of the year.
Another strong signal of increasing market liquidity is the record high stablecoin balances on centralized exchanges. Concretely, this growth is driven by USDT (ERC20 on Ethereum), which saw its balances on the exchanges reach a record level of 22.7 billion in October. This reflects a 54% increase (around $8 billion) so far in 2024.
Historically, growing stablecoin balances on exchanges are positively associated with higher prices in the crypto market, particularly the price of Bitcoin. This is because larger stablecoin stores may signal greater purchasing power to investors, as they can quickly trade stablecoins for other cryptocurrencies on exchanges (known for offering these trading services).
Larger stablecoin balances on exchanges may also signal investors’ willingness to accumulate crypto assets. Ultimately, this buying pressure tends to push asset prices higher, especially since investors often buy expecting prices to rise.
With the increasing liquidity of the market, investors have been led to wonder whether the Bitcoin bull run will resume soon. It is worth noting that the total amount of USDT (ERC20) on exchanges has has increased by 146%, from $9.2 billion to $22.7 billion since January 2023, when the current cycle officially began.
However, investors may want to lower their expectations, given that these USDT balances have increased by 20% since August 2024, while the price of Bitcoin has remained relatively calm.
Bitcoin Price at a Glance
At the time of writing, Bitcoin is valued at around $62,750, reflecting an increase of almost 3% over the past day.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView
