Stablecoin market capitalization has steadily reached $169 billion, led by USDT and USDC, with growth predating price movements in past cycles.
Historical data suggests that there is a positive correlation between increases in stablecoin balances on exchanges and increases in Bitcoin prices, and starting in January 2023, USDT on exchanges will This represents a notable increase of 146%.
With the rapid increase in on-chain transaction volume, there has been a significant increase in large or “whale” transactions on the Bitcoin network.
Record amounts of dollar-backed stablecoins and a surge in large-scale Bitcoin {{BTC}} trades form the basis for a broad BTC rally in coming weeks, reinforcing the asset’s bullish October seasonality. may be maintained.
CryptoQuant data shows stablecoin liquidity continues to rise to a record $169 billion at the end of September, representing a 31% year-to-date (YTD) increase.
The still dominant players are Tether’s USDT, whose market cap increased by $28 billion to nearly $120 billion and accounted for 71% of the market share; Circle’s USDC has increased by 44% since the beginning of the year. It boasts a market share of 21%.
Stablecoins are a type of cryptocurrency designed to provide price stability by being pegged to a reference asset, such as a fiat currency such as the US dollar, a commodity such as gold, or other cryptocurrencies.
Each stablecoin is supposed to be backed by an equal amount of fiat currency held in reserve. Stablecoins are typically issued against deposits of fiat currency. In other words, an increase in stablecoin supply translates into an increase in actual fiat currency being injected into the cryptocurrency ecosystem.
(CryptoQuant)
Most crypto spot and futures trading is done against stablecoin pairs, and the increased liquidity of stablecoins represents the potential for dry powder to be used to buy cryptocurrencies.
Looking at past trends, the number of stablecoins held on crypto exchanges has increased by 20% this year, showing a clear correlation with the rise in Bitcoin prices. are.
“Increasing stablecoin balances on exchanges is positively correlated with increases in Bitcoin and crypto prices,” said Julio Moreno, Head of Research at CryptoQuant. “Since January 2023, when the current bull cycle officially began, the total value of USDT (ERC20) on the exchange has increased from $9.2 billion to $22.7 billion (+146%).”
“What is remarkable is that these balances have increased by 20% even though the price of Bitcoin has been flat,” Moreno said.
According to the data, Bitcoin has fallen more than 6% since the beginning of October, with the month ending in the red for only the second time since 2013, with gains of up to 60% and an average of 22%. , which is the best for investors’ profits. .
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We typically see price increases of up to 16% after October 15th, and available stablecoin liquidity may support the rally. A key trigger in the coming months will be the US presidential election, which could determine the direction of general monetary and crypto policy over the next four years.
Expansion of whale trade
On-chain analytics firm Santiment reported that historically, price spikes are preceded by a spike in whale trading on the Bitcoin network. A whale is a colloquial term that refers to a large holder of any asset whose price can be directly affected by market movements.
“Our indicators show a significant spike in dormant activity on the Bitcoin network, comparable to Tuesday’s on-chain trading volume of $37.4 billion, the highest amount in seven months,” Santiment said. He said in a post by X. “Historically, the return of stagnant BTC to normal circulation is positive for future price movements.”
