Stablecoin Market Reaches $169 Billion, Signals Potential Bitcoin Price Surge

The stablecoin market has reached a solid $169 billion in capitalization. This growth is mainly due to USDT and USDC. Interestingly, increases in stablecoin balances often happen before price changes in Bitcoin.

For example, since January 2023, USDT on exchanges has jumped by 146%. This surge indicates a strong connection between stablecoin liquidity and Bitcoin prices.

We’re also seeing a rise in large transactions, known as "whale" transactions, on the Bitcoin network. This trend often signals potential price increases.

As of late September, stablecoin liquidity hit a record high. The data from CryptoQuant shows a 31% increase year-to-date. Tether’s USDT leads the pack, with a market cap nearing $120 billion, holding 71% of the market. Circle’s USDC follows, rising to $36 billion with a 44% increase this year, capturing 21% of the market share.

So, what exactly are stablecoins? They are cryptocurrencies designed to maintain a stable value by being pegged to assets like the US dollar or gold. Each stablecoin should be backed by an equivalent amount of fiat currency in reserve.

Most trading in crypto, both spot and futures, happens against stablecoin pairs. When stablecoin liquidity increases, it suggests that there are funds available for purchasing crypto.

Historically, there’s been a clear link between the amount of stablecoins on exchanges and rising Bitcoin prices. “Larger balances of stablecoins on exchanges are positively correlated with higher Bitcoin and crypto prices,” says Julio Moreno, head of research at CryptoQuant. He notes that since January, USDT on exchanges has grown from $9.2 billion to $22.7 billion.

Even with Bitcoin's price staying flat, stablecoin balances have increased by 20%. Bitcoin has seen a drop of over 6% since the start of October, a month that typically performs well for investors.

Price jumps often occur after October 15, and the current stablecoin liquidity could support this trend. Additionally, the upcoming U.S. presidential election may influence monetary and crypto policies for the next four years.

Whale transactions are on the rise. Santiment has reported an uptick in these transactions on the Bitcoin network. Historically, this increase has preceded price surges.

“Our metrics show a significant spike in dormant activity on Bitcoin’s network, along with $37.4 billion in on-chain volume, the highest in seven months,” Santiment shared. “Typically, dormant BTC returning to circulation is a positive sign for future price movements.”