Stablecoin liquidity is increasing, what does this mean? (CryptoQuant)

Stablecoin momentum is flashing positively, reaching all-time highs and increasing liquidity in the crypto market. As historical data shows, this is good news for bitcoin (BTC) and the entire crypto industry because more liquidity often correlates with higher prices.

A recent report by CryptoQuant revealed that the total market capitalization of the major USD-backed stablecoins now stands at $169 billion, which represents an increase of 31% or $40 billion since the beginning of the year . This growth caused liquidity in the crypto market, as measured by the value of the stablecoin, to reach an all-time high at the end of September.

Stablecoin liquidity is increasing

Increased liquidity can be seen in higher balances of stablecoin on centralized exchanges. Tether USD (USDT), which continues to dominate the stablecoin market, has been the main driver of this growth. Total USDT (ERC20) balances on centralized exchanges hit an all-time high of 22.7 billion this month, growing 54% or $8 billion year-to-date.

CryptoQuant also noted that roughly $8.5 billion USDT issued on the Tron network is currently held on centralized exchanges, which is a good sign.

“Larger balances of stablecoins on exchanges are positively correlated with higher Bitcoin and crypto prices,” the market analysis platform stated.

This bull run began in January 2023, and since then the total amount of USDT (ERC20) on centralized exchanges has grown from $9.2 billion to $22.7 billion, an increase of 146%.

USDT’s dominance has led the asset to amass a 71% share of the stablecoin market, with its closest rival USD Coin (USDC) trailing at 21%. USDT’s market cap is approaching $120 billion, up 30% or $28 billion since early 2024, while USDC is capped at $36 billion, representing growth 44% or $11 billion year to date. CryptoQuant said USDT and USDC have accounted for almost all of the net stablecoin growth recorded this year.

A Potential Bitcoin Rally

Interestingly, USDT and USDC have continued to rise on a monthly basis, albeit at a slower pace than earlier this year. An increase in the pace in the monthly market cap growth of these assets could signal a further rise in BTC and crypto prices, especially since the leading cryptocurrency has been flat.

While USDT and USDC continue to dominate, new players are emerging. Ripple Labs, the developer of the XRP Ledger, recently launched a USD-backed stablecoin, RLUSD. As of late September, RLUSD has already amassed a market capitalization of $47 million, and analysts say the asset has the potential to grow significantly.

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