• USDT’s monthly market cap turned positive after contracting by -2% while USDC surged by 20%
• Growing liquidity impulse usually sparks a rally

Stablecoin market cap growth, alongside Bitcoin’s price, can offer us some insights into potential liquidity effects on the broader cryptocurrency market. For example – USDT recently saw a slight fall in market cap by 2% over 30 days, only to rebound into positive territory just before the month’s end.

Additionally, USDC saw a significant surge of 20%, marking its fastest growth rate in a year.

The correlation between stablecoin market cap expansion and Bitcoin suggested that greater liquidity from stablecoins could be priming the market for an uptrend on the charts.

Historically, as stablecoin market caps expand, they inject liquidity that often precedes rallies in more volatile assets like Bitcoin. In fact, DAI and other stablecoins have also reflected similar patterns and the growing liquidity could fuel potential price surges.

If this stablecoin momentum continues, we may see further hikes across the broader crypto markets.

Bitcoin’s margin lending ratio

Further analysis seemed to reveal that as BTC began to dip, traders noticeably borrowed more USDT, presumably to buy Bitcoin in anticipation of a rebound. This shift marked an uptick in margin lending ratios.

However, instead of recovering, Bitcoin continued to decline with these over-leveraged positions. These traders found themselves underwater as the anticipated price hike failed to materialize.

This over-extension triggered a wave of deleveraging. In fact, traders were forced to sell off their Bitcoin to cover their positions, further driving down the price.