The total crypto market capitalization reached a new all-time high of $3.73 trillion on Dec. 14, 2024, but since then, the metric has dropped 21% to $2.91 trillion.
Despite the current drawdown, one analyst believes the metric could reach new highs in Q2 2025.
Total market cap and global liquidity index are correlated
Mark Quant, a crypto markets researcher, presented a study that indicated that a rising Global Liquidity Index (GLI) could pave the recovery path for the crypto market, potentially pushing the total crypto market cap to new all-time highs above $4 trillion in the second quarter of 2025.
The Global Liquidity Index (GLI) measures the ease of financing in global financial markets, and it can be utilized as a metric to understand global financial conditions.
When GLI rises, it indicates that investors have access to more capital, which boosts risk on assets such as crypto.
Bitcoin and Global Liquidity Index. Source: X
As illustrated in the chart, Quant explained that the GLI and the TOTAL market cap carried a strong 0.77 correlation with a 74-day offset. With the GLI being the leading indicator, its expansion often led to a bullish trend in cryptocurrencies. While the market might move sideways over the next 30 days, the analyst predicted early April could begin a bullish rally. Quant said,
“Once liquidity is fully priced in, $TOTAL could exceed the $4T market cap, aligning with previous liquidity-driven cycles.”
On a broader scale, Quant’s analysis draws similarities to Lyn Alden’s research from September 2024. The research piece “Bitcoin: A Global Liquidity Barometer” mentioned that Bitcoin moved 83% of the time toward global liquidity in any given 12-month period.
Bitcoin’s directional alignment with global liquidity. Source: Lynalden.com
Compared to other major asset classes such as SPX, GOLD and VT, Bitcoin’s correlation with global liquidity is the highest. Yet, the crypto asset was exposed to short-term deviations from time to time by “idiosyncratic events or internal market dynamics.”
Related: Why is the crypto market up today?
Is the crypto market bottom in?
Although the TOTAL market cap has been down 20% over the past 3 months, Dom, a market analyst, said it was currently testing its previous cycle 2021 high and a March 2024 high as support.
The analyst explained that the yearly relative volume weight average price or rVWAP sat right below the current market cap, which added further support to its market structure.
Dom said,
“This is very clear on this monthly chart and adds to the idea that acceptance under current monthly lows would break the bull market.”
Similarly, Daan Crypto, a crypto trader, highlighted that the current weekly close would be important from a bullish perspective. Currently, the TOTAL crypto market cap remains under its 2021 highs, which means there is bearish acceptance seeking dominance in the high time frame chart.
Crypto Market 1 week analysis by Daan Crypto. Source: X
Related: Bitcoin struggles near $90K as US tariff fears spook ETF investors
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
