Liquidity Returns to Crypto Market, Challenging Four-Year Cycle Model
The crypto market is showing signs of improved liquidity, which could be a positive indicator for future price movements. The supply of stablecoins has increased, reaching $306.7 billion in combined market capitalization, according to DefiLlama. This growth can be attributed to expanding use cases beyond traditional trading, with stablecoins being used in payments, remittances, and tokenized assets.
Another indicator of improving liquidity is the rise in decentralized exchange (DEX) volumes, which increased 3.73% over the past week. However, Wintermute experts estimate that aggregate inflows via existing channels, including ETFs and stablecoins, remain well below levels seen in previous bull cycles.
The return of liquidity to the market has led some analysts to question the relevance of Bitcoin's four-year cycle model. Historically, a reduction in miner rewards was followed by a period of growth, then a peak and a prolonged correction. However, some experts still see value in this model, pointing out that the current correction is similar to previous cycles.