Stalled USDT Liquidity Threatens Bitcoin Price Further Growth – Here’s Why

The price of Bitcoin has maintained a recovery trajectory over the last week, gaining by a significant 16.25% to move briefly above the $67,000 price mark. Bitcoin investors are likely hopeful the asset will record more price gains and finally embark on a bull run following the halving event in April. However, Bitcoin’s price future gains are theorized to be tied to multiple factors including the liquidity of the stablecoin market.

In an X post on Friday, prominent on-chain analytics platform CryptoQuant emphasized the importance of stablecoin liquidity to an appreciation in Bitcoin’s price. CryptoQuant stated that for premier cryptocurrency to experience further price increases, there is a need for an equal rise in the stablecoin market shares.

Related Reading: Coinbase Analysts Warn: Bitcoin’s Upward Trend Could Hit a Wall — Here’s Why

Stablecoin liquidity, especially USDT, needs to pick up for #Bitcoin prices to rise further.

USDT market cap growth is near 0%, down from 6.6% in March when Bitcoin topped $70K.

Faster growth in stablecoin liquidity is crucial for continued price increases. pic.twitter.com/8AJdq7TzTu

— CryptoQuant.com (@cryptoquant_com) July 19, 2024

For context, stablecoins refer to a type of cryptocurrency with a fixed value that is usually pegged to a reserve asset, usually the US dollar. These assets are combined valued at $163.56 billion and are critical to digital asset adoption for users with a fear of market volatility.  In relation to Bitcoin’s price, CryptoQuant specifically references Tether (USDT), the largest stablecoin and third largest cryptocurrency with a market cap value of $113.78 billion, as a major influencing factor. 

The analytics team explains that USDT’s growth in the last month has been near 0% (1.03%), thus suggesting a slight 3.21% increase in Bitcoin’s price over the same period. In contrast, USDT’s market shares grew by 6.6% in March 2024, the same time in which Bitcoin rose from $61,168 to secure a new all-time high at $73,750.

The relationship between both assets could stem from the prominent use of USDT in crypto trading. Thus, a higher level of USDT liquidity could allow traders to increase demand for risky assets, including Bitcoin. According to CryptoQuant, the Bitcoin market, therefore, requires a rapid rise in stablecoin liquidity to maintain its current positive price performance.

In other news, amidst Bitcoin’s current price rally, popular crypto analyst Ali Martinez has warned that Bitcoin must maintain its price above the $66,385 level to avoid a massive liquidation of about $42.67 million.  At the time of writing, Bitcoin continues to trade at $66,571 with a notable 4.65% gain in the last day. In a similar fashion, the asset’s daily trading volume is up by 38.08% and valued at $37.2 billion.