The total cryptocurrency market capitalization reached an all-time high (ATH) of $3.73 trillion on December 14, 2024. However, since then, the market has seen a 21% correction, bringing the total value down to $2.91 trillion. Despite this retracement, analysts predict a strong recovery in the second quarter of 2025, potentially pushing the market beyond the $4 trillion threshold.

Global Liquidity Index (GLI) Signals Potential Market Rebound

Market analyst Mark Quant has identified a strong correlation between the total crypto market capitalization and the Global Liquidity Index (GLI). According to his research, an upward trend in GLI could serve as a leading indicator for a market resurgence. If liquidity expands, it typically creates favorable conditions for risk assets like cryptocurrencies, allowing the market to regain momentum.

The GLI measures the ease of access to global financial liquidity and serves as a key metric for understanding overall financial conditions. Historical data suggests that when the GLI rises, investors gain access to more capital, fueling growth in the crypto market.

Crypto Market Trends & Liquidity Correlation

Quant’s analysis reveals a 0.77 correlation between the GLI and the total market capitalization, with a 74-day lag. Based on this pattern, the crypto market is expected to trade sideways over the next 30 days before entering an upward trend in early April 2025. He states:

"Once liquidity is fully priced in, the total crypto market cap could surpass $4 trillion, aligning with previous liquidity-driven cycles."

This perspective echoes previous research by Lyn Alden, who found that Bitcoin has historically moved in tandem with global liquidity trends approximately 83% of the time over any given 12-month period. Compared to other major asset classes such as the S&P 500 (SPX), gold, and the Vanguard Total World Stock Index (VT), Bitcoin exhibits the highest correlation with global liquidity. However, it occasionally experiences short-term deviations due to internal market dynamics or unique crypto-related events.

Has the Crypto Market Bottomed Out?

Despite a 20% decline in the last three months, some market analysts believe the crypto market may have already found its bottom. Analyst Dom notes that the current levels are testing key support zones from the 2021 peak and the March 2024 high.

Additionally, the relative volume-weighted average price (rVWAP) sits just below the current market valuation, providing an extra layer of support for the market structure. Dom explains:

"This setup is clearly visible on the monthly chart. If we see a breakdown below the current lows, it could challenge the ongoing bull market."

Similarly, crypto investor Daan Crypto emphasizes that the upcoming weekly close will be crucial for determining market sentiment. As of now, the total market capitalization remains below the 2021 highs, indicating that bearish pressure is still attempting to take control on higher timeframes.

With growing global liquidity and strong historical correlations, the crypto market may be on the verge of another explosive growth phase. If liquidity conditions remain favorable, analysts expect the total market capitalization to exceed $4 trillion in Q2 2025. However, traders should closely monitor key support and resistance levels, as well as macroeconomic trends, to navigate potential volatility in the months ahead.