lyNicholas Merten: Liquidity is needed for capitalization growth, but we see that it is constantly decreasing, so cryptocurrency prices are likely to fall as well

BestChange
2 min readSep 18, 2023

Nicolas Merten, a well-known crypto-analyst, said that a further fall in the market of digital assets is likely. According to him, the prerequisite for the fall of the main cryptocurrency and altcoins may be a decrease in the liquidity of stablecoins.

This is considered a qualitative indicator for fixing trends in the market of digital currencies. Currently, the liquidity of stablecoins continues to fall.

“Let’s just note the importance of the liquidity of stablecoins. For example, between April 2019 and July 2019, bitcoin went from $3,500 to $12,000. During the same period, the liquidity of stablecoins increased by 119%. Then we see a period of consolidation, liquidity also stayed at the same level. And this is a very good indicator,” Merten stated.

He pointed out that in 2021, bitcoin went from $3,900 to $65,000, with the liquidity of stablecoins increasing by 2,183%.

“Liquidity and price growth are linked. If liquidity is declining or consolidating, the market is not likely to grow either. This is true for cryptocurrencies and financial markets. You need liquidity to grow capitalization, but we see it constantly decreasing, so cryptocurrency prices are likely to fall as well,” Merten believes.

Earlier, he argued that the crypto industry, whose market capitalization is currently estimated at $1 trillion, will find it quite difficult to increase this figure to $10 trillion.

And a new report from Bitfinex says that capital outflows in the cryptocurrency market reached the $55 billion mark in August. The analysts’ conclusions are based on the aggregate realized value metric, which measures the realized value of BTC and ETH with the aggregate supply of the most popular stablecoins.

“An in-depth examination of the data reveals the prevailing trend: by early August, the industry began to experience capital outflows. August was the largest red monthly candle for BTC since the bear market bottom formed in November 2022 at 11.29%,” the Bitfinex report said.

While “volatility indicators continue to remain low, the market’s liquidity crisis has allowed individual events to have a greater impact on market movements,” according to analysts.

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