Everyone watches Bitcoin in the world of crypto.
Since inception, Bitcoin was the leading crypto asset. Is it, however, the most important? A case is being made that stablecoins are even more vital to the outlook of where crypto markets are heading.
This might seem counterintuitive. Nevertheless, if you think about it, this makes total sense. Liquidity is crucial and where capital is going is the entire story.
That means Bitcoin is the result, i.e. the destination. It is not the metric that tells the story.
In fact, Bitcoin's price action traditionally has reflected the legacy monetary system. When that expanded, Bitcoin did well.
What about the future? This is where stablecoins are poised to take over.
Stablecoins Overtakes Bitcoin As Indicator For Crypto Markets
What is driving the markets? This answer is always the same: supply and demand. When risk is on, Bitcoin does well. The opposite is also true. If investors/traders are moving away from risk, crypto plummets.
Few can argue that October and November were train wrecks for the crypto markets. Few involved did not become part of the carnage. Wallets are much lighter than they were a couple months ago. Bitcoin has "led" the way down, going from $125K to just north of $80K.
Nothing it at an all time high. Or is it?
When we look at the stablecoin market, the number on Ethereum set a record.
In 2025, the total stablecoin supply on Ethereum network (ERC-20) alone has reached $185 billion — a new all-time high — and continues to hover at that level this month.
In spite of a major pullback in markets, stablecoin totals remain near the ATH. What does this mean?
“This growth is more consistent than Bitcoin’s price and directly reflects capital entering the crypto ecosystem,” contributor XWIN Research Japan commented in one of CryptoQuant’s “Quicktake” blog posts.
That is the key. Capital is always the driver. Where is it heading? This is what market participants (and watchers) are always trying to figure out.
For crypto, it hasn't been exiting the system. This is vital.
Liquidity Remains
Liquidity is the entire game. This is nothing new for crypto.
Bitcoin price has always followed, to some degree, the M2 money supply. As liquidity is added to the system, we see how this affects the price. 2025 was no exception. Early in the year, it was pushing prices higher. Of late, things dried up.
Is M2 the proper metric? Actually, this has been useless for decades as not even the Fed pays attention to it anymore.
However, there is a new metric emerging which could better reflect the crypto markets. Of course, as this consumes more of the economy, it will be interesting to see if it is an overall reflection of the economy.
For now, it could be the leading indicator as to where the crypto markets are heading.
“Stablecoin supply matters because: 1 It is the primary liquidity source for trading, DEXs, lending, and derivatives. 2.It adjusts quickly, capturing investor flows faster than monthly/quarterly M2 data. 3. It tracks institutional and ETF-related inflows into crypto,” it explained.
“In both the 2021 bull market and the 2024–2025 recovery, rising stablecoin supply clearly preceded Bitcoin’s upside.”
Here we could see a transformation taking place. With increase liquidity in stablecoins, the impact on the economy should become clear. Obviously, further infrastructure is still required, something that is taking place.
At present, we are looking at things from a financial perspective. It will shift to the commercial with the entry of major banks into the stablecoin market.
Once this happens, the impact is on a lot more than just crypto.
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Yeah, my mind has been changing to so many things as of late. I am starting to agree here because I mean just look at Tether... They are one of the largest bond holders out there. It's the plan for dollar expansion, etc. Just as you have said in the past.
I know we have had on-chain arguments about things in the economy and the markets in the past, but I am beginning to see where, yes Task... You were right all along, lol. I have done a ton of maturing and research in the macro side of things instead of just looking at corporate level. I argued that was a huge economic driver, yeah, no, it isn't near as much as interest rates and such.
I believe it is going to bite them in the arse on the other end though and end up causing full on hyper inflation, but who knows, we shall see.
This post has been shared on Reddit by @x-rain through the HivePosh initiative.
Do you feel this bodes well for ETH's value with more fees and demand?
Bitcoin is an established coin and people have gained confidence in this coin. People are interested in investing here blindly.
Thank you very much for discussing many things in this post.