The market capitalization of USD Tether (USDT) has exceeded $120 billion, while all stablecoins combined now total $172 billion. This increase indicates a higher issuance of these coins, which typically has a positive impact on the price of bitcoin.
Recently, the market capitalization of USDT, the world’s largest stablecoin, has risen by over $1.6 billion or 0.30%, reaching approximately $120.14 billion according to CoinMarketCap.
During the same period, the total capitalization of stablecoins has increased by around $2.2 billion or 0.2%, as shown by DeFiLlama data, rising from just over $169 billion to $172 billion.
USDC, the second largest stablecoin after USDT, has seen its capitalization increase by over $200 million, reaching $35 billion by the end of this article from a starting point of $34.8 billion.
The rise in stable cryptocurrencies supply not only indicates increased liquidity in the cryptocurrency market but also provides investors with an opportunity to hold money in cryptocurrencies without direct exposure to asset volatility like bitcoin.
The issuance and capitalization of stablecoins are often viewed as catalysts for the price of bitcoin, as investors use these currencies to wait for clearer market trends before investing in assets like bitcoin.
According to CoinMarketCap analyst Alice Liu, the significant increase in stablecoin capitalization over the past twelve months suggests a substantial reserve of cash waiting to enter the cryptocurrency market once bitcoin’s price rises again.
The current $172 billion in stablecoins is approaching the all-time high of just over $180 billion recorded in 2022, reflecting the different context of the current bitcoin and cryptocurrency market compared to the past.
In 2022, the market entered a bearish cycle following the bullish rally of 2021, while today, the market is in a consolidation phase after reaching record prices seven months ago.
The difference in liquidity available in stablecoins for investing in volatile cryptocurrencies like bitcoin indicates a potential price increase for these assets. However, it is essential to note that stablecoins are also used for other purposes, such as investing in DeFi protocols to earn returns, which could reduce their direct impact on bitcoin’s price.
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