The Crypto and US Equities Markets: A Turbulent Week

The financial landscape witnessed a challenging start this week as both the cryptocurrency and US equities markets reacted negatively to the debut of China’s AI platform, DeepSeek. Despite the initial setbacks, Bitcoin’s price managed a recovery, climbing back above the $100,000 mark and maintaining a steady course to close the week.

In a recent on-chain analysis, it was revealed that liquidity on centralized exchanges has reached unprecedented levels. This surge in liquidity suggests that crypto bulls are now equipped with greater purchasing power. The pressing question remains: will this newfound buying strength drive Bitcoin to new heights?

Understanding the Impact of Expanding Stablecoins on Cryptocurrency Prices

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A recent report by blockchain intelligence firm CryptoQuant highlights a significant liquidity boost in the crypto sector following the US Presidential election in November 2024. The metric for liquidity in the cryptocurrency market is the total value of circulating stablecoins, which has recently hit an all-time high.

Data from CryptoQuant indicates that the market cap of dollar-pegged stablecoins has surpassed the $200 billion threshold, currently standing at $204 billion, marking a record high. This figure represents a substantial growth of over 22% since Donald Trump secured victory in the US elections.

One of the primary drivers of this expansion is Tether’s USDT, commanding nearly 70% of the USD-backed stablecoin market. The market capitalization of USDT is approximately $139 billion, reflecting a 15% increase since November of the previous year.

This growth is mirrored in the stablecoin reserves of centralized exchanges, with the USDT balance on these platforms reaching unprecedented levels. CryptoQuant reports that the market cap of USDT on centralized exchanges has surged from $30.5 billion to $43 billion over the past three months, marking a 41% increase.

Dollar-backed stablecoins are crucial for liquidity in trading on centralized exchanges. An increase in the stablecoin supply on these platforms indicates a rise in the buying power of cryptocurrency investors. CryptoQuant noted, “The subsequent surge in Bitcoin and cryptocurrency prices could be imminent, as the stablecoin liquidity impulse begins to expand once more.” Historically, a growing stablecoin market cap, especially on centralized exchanges, correlates with rising Bitcoin prices.

CryptoQuant added: “USDT’s liquidity impulse (30-day percentage change in market capitalization) is now slightly positive after a 2% contraction at the beginning of 2025. Further acceleration generally propels crypto prices upward. Meanwhile, USDC’s liquidity impulse is expanding by 20%, its fastest pace in a year.”