Bitcoin’s recent market surge is attributed to improved liquidity and record stablecoin levels, as analysed by Cryptoquant. Tether (USDT) and USDC saw significant increases in market capitalisation this past week. The Bull Score Index rose to 50, indicating a move into neutral territory from severe bearishness, with analysts noting that stablecoin liquidity often predicts BTC price gains.
Bitcoin has recently escaped its bearish streak, largely spurred by improved liquidity conditions and striking stablecoin reserves, according to blockchain analysis from Cryptoquant. It appears that the market is showing fresh signs of strength, thanks to stablecoin investments. Cryptoquant’s latest report highlights that the total market cap for stablecoins is now at a record high, something that has historically been linked to positive momentum for Bitcoin (BTC).
Among the stablecoins, Tether (USDT) and USDC have emerged as front runners, helping drive this growth. In the last week alone, USDT’s market cap saw an increase of $2.5 billion, while USDC gained $1.2 billion. To put things into perspective, over the last 30 days, USDT’s market cap surged by $5.3 billion and USDC rose by $6 billion — both figures notably outpacing their 30-day moving averages. According to Cryptoquant, this trend is viewed as a reliable indicator of increasing liquidity and potential price appreciation for Bitcoin.
However, it’s worth noting that while USDT’s reserves on exchanges dropped by 12% to $38 billion from a peak of $43 billion in February, USDC’s exchange balances have climbed to their highest since March 2023 at $6.5 billion. This fluctuating data underscores the mixed dynamics at play in the stablecoin market.
Adding to the bullish narrative, Cryptoquant’s Bull Score Index, which gauges market sentiment, climbed to 50 from last week’s 20, indicating a shift out of bearish territory into neutral ground. This positive movement coincides with a greater liquidity of stablecoins and Bitcoin scaling past vital on-chain resistance levels. Analysts warn, though, sustained price rallies would likely need scores above 60 on this index to signal true strength.
The firm’s analysis suggests that growth in stablecoin liquidity often sets the stage for Bitcoin price increases, as the availability of capital is integral for trading and investment. Despite Bitcoin lagging behind the surging supply of stablecoins for a while, its recent upswing aligns with overall liquidity trends in the market.
Notably, USDC’s rising exchange reserves could bolster crypto prices in the near term, as these higher reserves enhance market liquidity. On the flip side, the drop in USDT’s exchange presence might indicate a shift of capital towards other assets or into off-platform storage.
As it stands, Bitcoin’s price trajectory remains intricately linked to the performance of stablecoins. Cryptoquant’s findings affirm that liquidity is a key driver of market health. Analysts are advised to keep a close watch on whether the Bull Score Index edges into bullish territory, as that would indicate a stronger confidence among investors.
