According to the latest on-chain data, liquidity in the cryptocurrency markets has reached an all-time high. Here’s what the increased liquidity means to Bitcoin’s price and its future trajectory.
Stablecoin Market Cap Hits New High – Impact on Bitcoin Price
In its latest report, CryptoQuant revealed that liquidity in the crypto market reached a record high in late September, sparking discussions about the resumption of the Bitcoin bull market. According to the on-chain analytics firm, the crypto market capitalization is measured by the value of the stablecoin and the market capitalization, which is now estimated at $169 billion.
Data from CryptoQuant shows that the market capitalization of the largest dollar-backed stablecoin has increased significantly so far in 2024, rising by 31% (equivalent to $40 billion) year to date. Most of the growth, however, was driven by two major stablecoins, Tether’s USDT and Circle’s USDC.
Source: CryptoQuant
Surprisingly, 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 capitalization has grown by 30% in 2024 (approximately $28 billion) while USDC’s market cap has increased by 44% (equivalent to $11 billion) year to date until now.
Another strong signal of growing market liquidity is the record high balance of stablecoins on average exchanges. Specifically, this growth is driven by USDT (ERC20 on Ethereum), which saw its exchange rate reach a record high of 22.7 billion in October. This represents a 54% increase (about $8 billion) so far in 2024.
Historically, the increasing rates of stablecoins in the exchange are positively correlated with the high prices of the crypto market, especially the price of Bitcoin. This is because stablecoins stores can show a lot of buying power to investors, as they can quickly trade stablecoins for other cryptocurrencies on the exchange (which is known to offer these trading services).
Large stablecoin volumes on exchanges can also indicate the readiness of investors to accumulate crypto assets. Ultimately, this buying pressure tends to drive up prices, especially since investors tend to buy in anticipation of price increases.
With increased liquidity in the market, investors have been led to wonder about the Bitcoin bull run resuming soon. It is worth noting that the total amount of USDT (ERC20) in the exchange has increased 146% from $9.2 billion to $22.7 billion as of January 2023, when the current cycle officially begins.
However, investors may want to lower their expectations, considering that these USDT rates have risen by 20% since August 2024 while the price of Bitcoin has remained stagnant.
Bitcoin Price At A Glance
As of this writing, Bitcoin is valued at around $62,750, which represents an increase of almost 3% over the previous day.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView