According to the latest on-chain data, cryptocurrency market liquidity has reached an all-time high. Here’s how increased liquidity will affect Bitcoin’s price and future trajectory.
Stablecoin market capitalization hits new high — Impact on Bitcoin price
CryptoQuant revealed in its latest report that liquidity in the cryptocurrency market reached an all-time high in late September, sparking discussion about the resumption of the Bitcoin bull market. Liquidity in the crypto market, measured by stablecoin value and market capitalization, currently stands at around $169 billion, according to the on-chain analytics firm.
According to data from CryptoQuant, the market capitalization of major USD-backed stablecoins has increased significantly year-to-date in 2024, increasing by 31% (equivalent to $40 billion) since the beginning of the year. However, most of the growth was driven by 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 CryptoQuant data, USDT’s market capitalization increased by 30% (approximately $28 billion) in 2024, while USDC’s market capitalization increased by 44% (equivalent to $11 billion) since the beginning of the year.
Another strong sign of increasing market liquidity is that stablecoin balances on centralized exchanges are at an all-time high. Specifically, this growth has been driven by USDT (Ethereum’s ERC20), with balances on the exchange reaching an all-time high of 22.7 billion in October. This reflects an increase of 54% (approximately $8 billion) by 2024.
Historically, an increase in stablecoin balances on an exchange has a positive relationship with an increase in cryptocurrency market prices, especially Bitcoin prices. This is because if the stablecoin store is large, investors can quickly trade the stablecoin for other cryptocurrencies on exchanges (which are known to offer these trading services). , because it allows you to demonstrate more purchasing power.
An increase in stablecoin balances on an exchange may also indicate that investors are ready to accumulate crypto assets. Ultimately, this buying pressure tends to push asset prices higher, especially since investors often buy with the expectation that prices will rise.
As market liquidity increased, investors began to wonder if the Bitcoin bull market would resume soon. It is worth noting that since January 2023, when the current cycle officially began, the total value of USDT (ERC20) on the exchange has increased by 146%, from $9.2 billion to $22.7 billion.
However, given that USDT balances have increased by 20% since August 2024 while Bitcoin prices have remained relatively stable, investors may want to lower their expectations.
Bitcoin price overview
As of this writing, Bitcoin’s value is around $62,750, reflecting an increase of almost 3% over the past day.
BTC price on daily time frame | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView
