Liquidity Surges in Crypto Market, But Impact Remains Muted

The crypto market is witnessing an interesting trend as liquidity continues to grow, although the impact on the market remains muted.

The crypto market is experiencing an interesting trend where liquidity is continuously increasing, but its impact on the market remains minimal.

According to a report by CryptoQuant analyst Cauê Oliveira, over $3.65 billion has entered the market through the stablecoin USDT over the last 30 days. This influx of capital, as highlighted by Oliveira, signals that fresh capital is entering the crypto market, which could set the stage for future price movements.

However, despite this capital entering the market, it has not yet translated into significant buying pressure, leaving many to wonder when the full impact of this liquidity will be felt.

So far, the global crypto market has declined below the $2 trillion mark. In particular, falling below this valuation, the crypto market has seen a gradual decrease, bringing its valuation to $1.94 trillion, down by 4.8% in the past day.

The increase in liquidity is evident in the surge observed in stablecoin reserves, according to Oliveira. Notably, stablecoins like USDT are crucial in bridging traditional finance with the digital asset space.

For new USDT to be issued, assets from the traditional financial system must be collateralized, indicating that much of this new liquidity is tied to outside capital coming into the crypto market.

While the increase in stablecoin reserves suggests a rising demand for digital assets, Oliveira highlighted that the capital remains largely on the sidelines. According to the analyst, these funds have not been directed toward immediate purchases, but they represent significant “firepower” that could be unleashed at any moment.

The current situation in the crypto market begs the question: why is this capital not being deployed immediately? According to the CryptoQuant analyst, one possible explanation is that institutional investors may be cautiously entering the market through methods designed to minimize short-term price fluctuations.

The analyst explained :

It is possible that institutional investors are buying digital assets via TWAP orders or with algorithms to reduce the impact on the short-term price.

For context, many institutions use techniques like Time-Weighted Average Price (TWAP) orders or algorithms to execute large trades gradually, ensuring they don’t drive prices up too quickly with their buying activity.

This strategy helps reduce market impact while enabling these investors to accumulate positions over time. Notably, institutional interest has been one of the major drivers of growth in the cryptocurrency market, especially since the bull run in 2021.

Large players such as hedge funds, asset managers, and even traditional financial institutions have been exploring crypto, but they typically avoid causing large, sudden price swings.

As a result, while liquidity is growing, the full effects of this capital inflow may take time to materialize in the form of price increases for major cryptocurrencies like Bitcoin and Ethereum.

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