Stablecoin dynamics are flashing positive, reaching record highs and boosting liquidity within the crypto market. As historical data shows, this is good news for bitcoin (BTC) and the entire crypto industry because more liquidity often correlates with higher prices.

A recent CryptoQuant report revealed that the total market capitalization of major USD-backed stablecoins now stands at $169 billion, representing a 31% or $40 billion increase since the beginning of the year. This growth caused liquidity in the crypto market, as measured by stablecoin value, to reach a record high in late September.

Stablecoin Liquidity is Increasing

The increasing liquidity can be seen in higher stablecoin balances on centralized exchanges. Tether USD (USDT), which continues to dominate the stablecoin market, has been the major driver of this growth. The total USDT (ERC20) balances on centralized exchanges hit a record high of 22.7 billion this month, growing by 54% or $8 billion year-to-date.

CryptoQuant also noted that roughly $8.5 billion USDT issued on the Tron network is currently held on centralized exchanges, which is a good sign.

“Larger balances of stablecoins on exchanges are positively correlated with higher Bitcoin and crypto prices,” the market analytics platform stated.

This bull cycle started in January 2023, and since then, the total amount of USDT (ERC20) on centralized exchanges has grown from $9.2 billion to $22.7 billion, a whopping 146% increase.

The dominance of USDT has led the asset to amass a 71% share of the stablecoin market, with its closest rival, USD Coin (USDC), following with 21%. USDT’s market cap is nearing $120 billion, up 30% or $28 billion since the beginning of 2024, while USDC has a cap of $36 billion, representing a 44% or $11 billion growth year-to-date. CryptoQuant said USDT and USDC have accounted for almost all the net stablecoin growth recorded this year.

A Potential Bitcoin Rally

Interestingly, USDT and USDC have continued to increase monthly, although slower than earlier this year. An increased pace in the monthly growth of these assets’ market caps could signal a new rally for BTC and crypto prices, especially since the leading cryptocurrency has been flat.

While USDT and USDC continue to dominate, new players are emerging. Ripple Labs, the developer of the XRP Ledger, recently launched a USD-backed stablecoin, RLUSD. Since late September, RLUSD has already amassed a market cap of $47 million, and analysts say the asset has the potential to grow significantly.