Crypto Market Cap Could Exceed $4 Trillion by Q2 2025

A recent analysis suggests that the total market capitalization of the cryptocurrency sector is on track to surpass $4 trillion in the second quarter of 2025. This projection comes after the total crypto market cap reached an impressive all-time high of $3.73 trillion on December 14, 2024. However, since that peak, the market has experienced a significant decline, dropping 21% to its current valuation of $2.91 trillion.

Understanding the Global Liquidity Index (GLI)

Mark Quant, a prominent researcher in crypto markets, has conducted a study indicating that a rising Global Liquidity Index (GLI) could serve as a catalyst for the recovery of the crypto market. The GLI is a crucial metric that measures the ease of financing in global financial markets, providing insights into overall financial conditions. According to Quant, the GLI and the total market cap exhibit a strong correlation of 0.77 with a 74-day offset, suggesting that the GLI often acts as a leading indicator for market movements.

Potential for a Bullish Trend

As the GLI expands, it typically leads to a bullish trend in cryptocurrencies. While the market may experience sideways movement over the next 30 days, Quant predicts that early April could mark the beginning of a bullish rally. This optimism is echoed by other analysts in the field.

Comparative Analysis with Bitcoin

Quant’s analysis draws parallels to research conducted by Lyn Alden in September 2024, titled “Bitcoin: A Global Liquidity Barometer.” Alden’s findings revealed that Bitcoin tends to move in alignment with global liquidity approximately 83% of the time over any given 12-month period. This correlation is notably higher than that of other major asset classes, including the S&P 500 (SPX), gold, and the Vanguard Total World Stock ETF (VT).

Market Dynamics and Short-Term Deviations

Despite Bitcoin’s strong correlation with global liquidity, it is not immune to short-term deviations caused by unique events or internal market dynamics. Currently, the total market cap has declined by 20% over the past three months. However, market analyst Dom notes that it is testing previous cycle highs from 2021 and a March 2024 high as support levels.

Market Structure and Support Levels

Dom further explains that the yearly relative volume weighted average price (rVWAP) is situated just below the current market cap, providing additional support to its market structure. This indicates that there may be a foundation for a potential rebound in the market.

Importance of Weekly Close

Daan Crypto, another crypto trader, emphasizes the significance of the current weekly close from a bullish perspective. As it stands, the total crypto market cap remains below its 2021 highs, indicating a bearish sentiment that is seeking dominance in the high time frame chart.

Conclusion: Proceed with Caution

While the projections for the crypto market cap are optimistic, it is essential to approach these predictions with caution. This article does not constitute investment advice or recommendations. Every investment and trading decision carries inherent risks, and readers are encouraged to conduct their own research before making any financial commitments. For more detailed insights, you can refer to the original article.