Record Stablecoin Liquidity, Spike in BTC Transactions Could Fuel Bitcoin Price Surge

Stablecoin liquidity has continued to grow to a record $169 billion in late September, data from CryptoQuant shows, indicating a 31% year-to-date (YTD) increase.

The leading contenders in the market are Tether’s USDT, which saw its market capitalization surge by an impressive $28 billion to approximately $120 billion, accounting for around 71% of the market, and Circle’s USDC, whose market cap jumped by $11 billion to reach $36 billion, representing a significant 44% increase year-to-date and holding a 21% share.

Stablecoins are a type of cryptocurrency designed to offer price stability by being pegged to a reference asset, which could be fiat money like the US dollar, commodities like gold, or other cryptocurrencies.

Each stablecoin is designed to have the same value as a specific amount of traditional currency (like dollars or euros), which is kept in reserve. Generally, stablecoins are issued following deposits of traditional money, so an expansion in the supply of stablecoins corresponds to a real increase in traditional money being introduced into the crypto market.

In simpler terms, most cryptocurrency transactions involving both current (spot) and future contracts are done using stablecoins as their counterparts. An expansion of stablecoin availability suggests there may be a large amount of funds ready to invest in buying more cryptocurrencies.

Over the course of this year, there’s been a significant increase (up by 20%) in the amount of stablecoins stored on cryptocurrency exchange platforms. This growth appears to be directly linked with an uptrend in Bitcoin‘s price, suggesting that historic market movements support this relationship.

According to CryptoQuant’s head of research, Julio Moreno, there seems to be a strong connection between increased stablecoin balances on cryptocurrency exchanges and higher prices for Bitcoin and other digital currencies. For instance, since the start of the current bull market in January 2023, the total USDT (ERC20) held on these platforms has surged from $9.2 billion to $22.7 billion, marking a significant increase of 146%.

Moreno pointed out that remarkably, these amounts have increased by 20% despite the fact that Bitcoin’s price has stayed constant.

Bitcoin has experienced a decrease of approximately 6% since the beginning of October, according to available data. This month, which has only seen two negative closures since 2013, is historically significant because it can yield impressive gains – as high as 60% in some cases – and an average of 22%, making it a highly profitable period for investors.

Price surges of up to 16% tend to occur after October 15th, possibly due to increased stablecoin liquidity. A major factor influencing events in the coming months is the upcoming U.S. presidential election, which may shape monetary and cryptocurrency policies for the following four years.

Whale Transactions Grow

According to an analysis company specializing in blockchain data, there’s been an increase in significant Bitcoin transfers by major investors (often called “whales”), which has previously signaled a rise in price. These whales are influential players who own large quantities of an asset, and their trades can significantly impact market prices.

According to our data, there was a significant increase in inactive Bitcoin network activity that coincided with a $37.4 billion transaction volume on Tuesday, the highest in seven months, as mentioned in a recent post by Santiment. Typically, dormant Bitcoin being moved back into regular circulation is a favorable sign for future price fluctuations.