SUMMARY
- The stablecoin market cap has grown to $169 billion, led by USDT and USDC, with increased balances historically linked to Bitcoin price rises.
- Bitcoin network activity has surged, with a 146% rise in USDT on exchanges and a significant spike in large transactions and on-chain volume since January 2023.
A record increment in dollar-backed stablecoins and a surge in large Bitcoin (BTC) transactions may set the stage for a broader BTC rally in the coming weeks, keeping up October’s traditionally bullish season for the resource. Data from CryptoQuant shows that stablecoin liquidity reached a record $169 billion by late September, stamping a 31% year-to-date (YTD) increment. The biggest players remain Tether’s USDT, which saw its market cap develop by $28 billion to nearly $120 billion, claiming 71% of the market share, and Circle’s USDC, which rose by $11 billion to $36 billion, holding a 21% market share.
Stablecoins are designed to offer price stability by being pegged to resources such as fiat currencies, commodities, or other cryptocurrencies. These coins are sponsored by equivalent fiat reserves, meaning an increment in stablecoin supply reflects a convergence of real fiat money into the cryptocurrency market. Most crypto trading pairs, whether spot or futures are conducted with stablecoins, so the rise in liquidity is regularly seen as a flag of potential purchasing power prepared to be deployed into cryptocurrencies like Bitcoin.
Historically, there has been a solid relationship between the number of stablecoins held on exchanges and Bitcoin price increments. This year alone, the stablecoin equalizations on crypto exchanges have grown by 20%. Since January 2023, when the current bull cycle started, the amount of USDT (ERC20) on exchanges expanded from $9.2 billion to $22.7 billion—a noteworthy 146% rise, according to Julio Moreno, CryptoQuant’s head of research. This increment in stablecoin balances happened even as Bitcoin prices remained flat, implying a potential uptick in BTC movement once market conditions align.
Despite Bitcoin’s 6% decrease since the start of October, history proposes that price gains, in some cases as high as 16%, typically happen after mid-October. October has been a favorable month for Bitcoin, creating gains in all but two years since 2013, with an average return of 22% and peak gains as high as 60%. Stablecoin liquidity, presently at exceptional levels, may play a pivotal part in supporting a Bitcoin rally in the coming weeks.
A major factor to observe in the months ahead is the U.S. presidential election, which could impact general financial and cryptocurrency policies for the next four years. With rising stablecoin reserves and Bitcoin’s historical patterns, a potential price surge may be on the horizon, reinforced by the liquidity waiting on exchanges. This dynamic, matched with political advancements, could shape the crypto market’s direction moving forward.