Bitcoin Has Benefited From U.S. Dollar Liquidity to Support Banks: Morgan Stanley

Expectations of increased U.S. dollar liquidity to support the banking sector following a string of forced closures has helped bitcoin (BTC) rally, but other factors are also at play, Morgan Stanley said in a research report Sunday.

Bitcoin, the world’s largest cryptocurrency by market cap, has gained 69% year-to-date.

“Bitcoin trading order book liquidity is at the lowest level in a year, meaning lower volumes can drive larger price moves than before,” analysts led by Sheena Shah wrote.

Traders on Binance, the world's largest crypto exchange, now set the daily price for bitcoin with its share of trading volume reaching 80%, the report said.

Issuance of the largest stablecoin, tether (USDT), has risen 10% in the last month and 16% this year, but that hasn’t been enough to offset the reduction in other stablecoins such as binance USD (BUSD) and USD coin (USDC), the note said.

A stablecoin is a type of cryptocurrency whose value is pegged to another asset, usually the U.S. dollar. Stablecoins flows are indicative of money entering or leaving the crypto ecosystem.

Morgan Stanley noted that over half of total tether issuance – and 70% of recent issuance – is on the Tron blockchain. Last week, the U.S. Securities and Exchange Commission sued Tron founder Justin Sun and his companies for fraud. Exchanges Kraken and Binance appear to be the main recipients of the new USDT, the note added.

Read more: U.S. Banking Crisis Could Present an Opportunity for Some Crypto Exchanges: JPMorgan