Stablecoin trends are improving, reaching record highs and increasing liquidity within the cryptocurrency market. This is good news for Bitcoin (BTC) and the cryptocurrency industry as a whole, as historical data shows that increased liquidity often correlates with higher prices.
A recent CryptoQuant report revealed that the market capitalization of major USD-backed stablecoins now stands at $169 billion, an increase of 31% or $40 billion since the beginning of the year. Due to this growth, liquidity in the cryptocurrency market, as measured by the value of stablecoins, reached an all-time high in late September.
Stablecoin liquidity is increasing
The increase in liquidity is seen in the increase in stablecoin balances on centralized exchanges. Tether USD (USDT), which continues to dominate the stablecoin market, is the main driver of this growth. Total USDT (ERC20) balances on centralized exchanges reached a record high of 22.7 billion this month, an increase of 54% or $8 billion since the beginning of the year.
CryptoQuant also pointed out that approximately $8.5 billion of USDT issued on the Tron network is currently stored on centralized exchanges, which is a good sign.
“The increase in stablecoin balances on exchanges is positively correlated with the rise in the price of Bitcoin and cryptocurrencies,” the market analysis platform said.
This bullish cycle began in January 2023, and since then, the total value of centralized exchange USDT (ERC20) has increased by a whopping 146%, from $9.2 billion to $22.7 billion.
USDT’s dominance gives the asset a 71% share of the stablecoin market, followed by its closest rival USD Coin (USDC) at 21%. USDT’s market capitalization is approaching $120 billion, an increase of 30% ($28 billion) since the beginning of 2024. Meanwhile, USDC has a market capitalization of $36 billion, representing a year-to-date growth of 44% ($11 billion). CryptoQuant said USDT and USDC accounted for almost all of the net stablecoin growth recorded this year.
Possibility of Bitcoin rise
Interestingly, USDT and USDC continue to increase each month, albeit at a slower rate than earlier this year. The increased pace of monthly growth in the market capitalization of these assets could be a sign of another rally in BTC and crypto prices, especially as major cryptocurrencies remain flat.
While USDT and USDC remain dominant, new players are also emerging. Ripple Labs, the developer of the XRP Ledger, recently launched the USD-backed stablecoin RLUSD. Since late September, RLUSD has already amassed a market capitalization of $47 million, and analysts say this asset has the potential for significant growth.
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