According to the latest on-chain data, liquidity in the cryptocurrency markets has reached an all-time high. Here are the consequences of rising liquidity for the price of Bitcoin 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 resuming the Bitcoin bull market. According to the on-chain analytics company, the liquidity of the crypto market is measured by stablecoin value and market capitalization, which now stands at approximately $169 billion.
Data from CryptoQuant shows that the total market capitalization of major US dollar-backed stablecoins has increased significantly so far in 2024, up 31% (equivalent to $40 billion) year to date. However, most of the growth came from the two largest stablecoins, Tether’s USDT and Circle’s USDC.
Source: CryptoQuant
Unsurprisingly, USDT and USDC continue to dominate the stablecoin industry, with market shares of 71% and 21% respectively. According to data from CryptoQuant, USDT’s market cap has grown by 30% in 2024 (approximately $28 billion), while USDC’s market cap has grown by 44% (equivalent to $11 billion) this year.
Another strong signal of growing market liquidity is the record high stablecoin balances on centralized exchanges. This growth is mainly driven by USDT (ERC20 on Ethereum), whose balances on exchanges reached a record high of 22.7 billion in October. This reflects an increase of 54% (approximately $8 billion) so far in 2024.
Historically growing balances of stablecoins on exchanges are positively associated with higher crypto market prices, especially the Bitcoin price. This is because the larger stablecoin stores may indicate greater purchasing power for investors as they can quickly trade stablecoins for other cryptocurrencies on exchanges (known to offer these trading services).
Larger stablecoin balances on exchanges could also be a sign of investor willingness to do so collect crypto assets. Ultimately, this buying pressure tends to push asset prices higher, especially since investors often make purchases expecting prices to rise.
With the growing liquidity in the market, investors have started wondering if the Bitcoin bull run will resume soon. It is worth noting that the total amount of USDT (ERC20) is on exchanges has increased 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 as these USDT balances have risen 20% since August 2024, while the price of Bitcoin has fallen. remained relatively quiet.
Bitcoin price at a glance
At the time of writing, Bitcoin is valued at around $62,750, reflecting an increase of almost 3% in the past day.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView