Bitcoin Bull Run To Resume Soon? Crypto Market Liquidity Reaches All-Time Highs
According to recent on-chain data, liquidity in the cryptocurrency markets has soared to unprecedented levels. This surge in liquidity has sparked discussions about whether the Bitcoin bull market will soon pick up again. The analytics firm CryptoQuant has reported that crypto market liquidity is measured by stablecoin value and market capitalization, which currently stands at approximately $169 billion.
The data from CryptoQuant reveals that the total market capitalization of major US dollar-backed stablecoins has seen substantial growth in 2024, rising by 31% (equivalent to $40 billion) year-to-date. The majority of this growth has been driven by two leading stablecoins, namely Tether’s USDT and Circle’s USDC.
Unsurprisingly, USDT and USDC continue to dominate the stablecoin industry, with market shares of 71% and 21%, respectively. CryptoQuant data indicates that USDT’s market capitalization has grown by 30% in 2024 (approximately $28 billion), while USDC’s market cap has surged by 44% (equivalent to $11 billion) year-to-date.
Another notable indicator of market liquidity growth is the record-high stablecoin balances on centralized exchanges, particularly driven by USDT (ERC20 on the Ethereum network). USDT balances on exchanges reached a new high of 22.7 billion in October, marking a 54% increase (around $8 billion) since the beginning of 2024.
Historically, the increasing balances of stablecoins on exchanges have been associated with higher cryptocurrency prices, specifically the price of Bitcoin. This correlation arises from the fact that larger pools of stablecoins signal greater buying power for investors, as they can swiftly trade stablecoins for other cryptocurrencies on exchanges that facilitate such transactions.
Furthermore, larger stablecoin balances on exchanges can also indicate investors’ readiness to accumulate crypto assets. This buying pressure typically drives asset prices higher, particularly as investors often make purchases with the expectation of upward price movements.
Given the growing liquidity in the market, investors have started contemplating the possibility of the Bitcoin bull run resuming soon. It is important to note that the total amount of USDT (ERC20) on exchanges has surged by 146% from $9.2 billion to $22.7 billion since January 2023, which marks the beginning of the current cycle.
However, investors should temper their expectations since these USDT balances have only increased by 20% since August 2024, while Bitcoin’s price has remained relatively stable.
At present, Bitcoin is valued at around $62,750, representing an almost 3% increase in the past day.
Featured image from iStock, chart from TradingView.