Source: Cointelegraph Original: "{title}"
On December 14, 2024, the total market capitalization of the cryptocurrency market reached a historic high of $3.73 trillion, but since then, this metric has dropped by 21%, falling to $2.91 trillion.
Despite the current downtrend, one analyst believes this metric could reach a new high in the second quarter of 2025.
Total Market Capitalization Related to Global Liquidity Index
Cryptocurrency market researcher Mark Quant presented a study indicating that the rising Global Liquidity Index (GLI) may pave the way for a recovery in the cryptocurrency market, potentially pushing the total market capitalization of cryptocurrencies above $4 trillion to a new historic high in the second quarter of 2025.
The Global Liquidity Index measures the ease of financing in global financial markets and can be used as an indicator of global financial conditions.
When the Global Liquidity Index rises, it indicates that investors have access to more funds, which drives investment in risk assets like cryptocurrencies.
Bitcoin and the Global Liquidity Index. Source: X platform
As shown in the chart, Quant explains that there is a significant correlation between the Global Liquidity Index and the total market capitalization of cryptocurrencies, with a correlation coefficient of 0.77 and a 74-day lag. Since the Global Liquidity Index is a leading indicator, its expansion often triggers a bull market in the cryptocurrency market. Although the market may consolidate over the next 30 days, this analyst predicts that a bull market rebound could begin in early April. Quant stated:
"Once liquidity is fully reflected in prices, the total market capitalization of cryptocurrencies ($TOTAL) could exceed $4 trillion, consistent with previous liquidity-driven cycles."
From a broader perspective, Quant's analysis aligns with Lyn Alden's research from September 2024. Her report, "Bitcoin: A Global Liquidity Barometer," mentioned that Bitcoin's price movement is consistent with global liquidity 83% of the time over any 12-month period.
Bitcoin's Directional Consistency with Global Liquidity. Source: Lynalden.com
Compared to other major asset classes like the S&P 500 Index (SPX), Gold (GOLD), and the Global Stock Index (VT), Bitcoin has the highest correlation with global liquidity. However, this crypto asset can sometimes experience short-term deviations due to "special events or internal market dynamics."
Has the Cryptocurrency Market Hit Bottom?
Despite the total market capitalization of cryptocurrencies dropping by 20% over the past three months, market analyst Dom states that it is currently testing the highs of the previous cycle in 2021 and the highs from March 2024 as support levels.
This analyst explains that the annual relative volume-weighted average price (rVWAP) is just below the current market capitalization, providing further support for its market structure.
Dom stated, "This can be seen very clearly from this monthly chart, and it further supports the view that if the market accepts prices below the current monthly low, the bull market will be broken."
Similarly, cryptocurrency trader Daan Crypto emphasizes that the current weekly closing price is crucial from a bullish perspective. Currently, the total market capitalization of cryptocurrencies remains below the 2021 highs, indicating that bearish sentiment is trying to dominate in the long-term charts.
Daan Crypto's weekly analysis of the cryptocurrency market. Source: X platform
Related: Bitcoin Volatility Surges Amid U.S. Cryptocurrency Reserve and Tariff Panic
This article does not contain investment advice or recommendations. Every investment and trading operation carries risks, and readers should conduct their own research when making decisions.
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