Stablecoin Market Liquidity Surges, Boosting Crypto Sector Optimism

• The combined value of the market for the largest USD-backed stablecoins has risen to $169B.
• Tether USD (USDT), is largely responsible for this expansion.

Record highs in stablecoin dynamics have increased market liquidity in the cryptocurrency sector. Bitcoin (BTC) and the whole cryptocurrency sector might take heart from this, since past performance indicates that more liquidity usually leads to higher prices.

According to a new analysis by CryptoQuant, the combined value of the market for the largest USD-backed stablecoins has risen to $169 billion, a 31% gain or $40 billion since the start of the year. The value of stablecoins, a measure of market liquidity, hit an all-time high in late September due to this rise.

Favorable Correlation

Greater stablecoin holdings on centralized exchanges are indicative of the growing liquidity. The stablecoin market leader, Tether USD (USDT), is largely responsible for this expansion. With a growth of 54% or $8 billion so far this year, the total USDT (ERC20) balances on centralized exchanges reached a new high of 22.7 billion this month.

An encouraging indicator, according to CryptoQuant, is that centralized exchanges already hold around $8.5 billion USDT issued on the Tron network. The market analytics platform has said that there is a favorable correlation between larger holdings of stablecoins on exchanges and higher Bitcoin and crypto prices.

There has been an unprecedented 146% growth, from $9.2 billion to $22.7 billion, in the total quantity of USDT (ERC20) on centralized exchanges since the beginning of this bull cycle in January 2023.

With USD Coin (USDC) coming in second with 21% of the stablecoin market, USDT has accumulated 71% of the market. USDC’s market value is $36 billion, reflecting a 44% rise, or $11 billion growth year-to-date, while USDT’s cap is approaching $120 billion, an increase of 30%, or $28 billion, since the beginning of 2024. 

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