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. Why A Stagant USDT Liquidity Is Harmful To Bitcoin? 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 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. Related Reading: Bitcoin Bollinger Bands Squeezing: Is BTC Ready For $140,000? Analyst Highlights “Dangerous” BTC Price Level 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. Featured image from Big Stock Photo, chart from Tradingview.com