Recent data suggests that an increase in stablecoin liquidity is a precursor to prolonged positive trends in the cryptocurrency market. This indicates that Bitcoin might be on the cusp of its next rally as stablecoin liquidity continues to grow. As per a report from CryptoQuant, the liquidity momentum for Tether (USDT) and USD Coin (USDC) has started to rise again, with the latter witnessing a rate of expansion not seen in a year.
Ever since Donald Trump’s victory in the U.S. presidential election, liquidity conditions in the cryptocurrency market have enhanced. The total value of circulating stablecoins has seen an upswing, typically signaling a price rally. The combined market cap of United States dollar-backed stablecoins has crossed the $200 billion threshold, reaching a record high of $204 billion. This milestone was achieved last week, marking a $37 billion increase since Trump’s win in early November.
USDT is the primary catalyst for the growth in stablecoin liquidity. However, USDC has also gained considerable momentum. USDT’s market cap now stands at $139.4 billion, following a 15% ($19 billion) surge since November 4. Concurrently, USDC’s market cap has soared by 48% (by $17 billion) over the same period, currently resting above $53.3 billion.
The report by CryptoQuant unveils that USDT’s liquidity impulse, referring to the 30-day percentage change in market capitalization, has turned slightly positive after a 2% drop in early 2024. USDC’s liquidity impulse has seen a more substantial expansion, rising 20% for the first time in nearly a year.
“Historically, a growing liquidity impulse signals a subsequent rally in crypto prices… A further acceleration typically drives crypto prices higher,” remarks the analytics platform. As stablecoins grow, their liquidity expansion has spread to centralized crypto exchanges. The total value of USDT deposited on these trading platforms has reached unprecedented levels, escalating from $30.5 billion on November 4 to $43 billion today, a 41% increase ($12.5 billion).
“The total value of stablecoins is a critical liquidity source for trading on exchanges, and its expansion is generally associated with higher crypto prices,” CryptoQuant observed.
