According to the latest on-chain data, liquidity in cryptocurrency markets has reached an all-time high. Here is the implication of increased liquidity on bitcoin price and its future trajectory.
Stablecoin Market Cap Hits New Highs: Impact on bitcoin Price
In its latest report, CryptoQuant twitter&utm_medium=sns&utm_campaign=dashboard&utm_content=crypto-weekly-report” target=”_blank” rel=”noopener nofollow”>revealed That liquidity in the cryptocurrency market hit a record high in late September, sparking talk of a resumption of the bitcoin bull market. According to the on-chain analytics firm, cryptocurrency market liquidity is measured by the value of the stablecoin and market capitalization, which is now 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, rising 31% (equivalent to $40 billion) so far this year. However, most of the growth was driven by the two largest stablecoins, Tether's USDT and Circle's USDC.
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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, the market capitalization of USDT has grown by 30% in 2024 (around $28 billion), while the market capitalization of USDC has increased by 44% (equivalent to $11 billion) so far this year.
Another strong sign of growing market liquidity is the record stablecoin balances on centralized exchanges. Specifically, this growth is driven by USDT (ERC20 on ethereum), whose balances on exchanges reached a record of 22.7 billion in October. This reflects an increase of 54% (about $8 billion) so far in 2024.
Historically, increasing stablecoin balances on exchanges are positively associated with higher prices in the cryptocurrency market, specifically the price of bitcoin. This is because larger stablecoin stores can indicate greater purchasing power for investors as they can quickly exchange stablecoins for other cryptocurrencies on exchanges (known for offering these trading services).
Higher stablecoin balances on exchanges may also indicate investors' willingness to accumulate crypto assets. Ultimately, this buying pressure tends to drive asset prices higher, especially since investors often buy expecting an upward movement in prices.
With increasing liquidity in the market, investors have wondered if bitcoin's bull run will resume soon. It is worth noting that the total amount of USDT (ERC20) 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 expectations, considering 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% in the last day.
The price of btc on the daily timeframe | Source: BTCUSDT chart on x/xVPKXBu8/" target="_blank" rel="noopener nofollow">TradingView
Featured image from iStock, chart from TradingView
