Key factors driving the crypto market to soar to 4 trillion dollars

Author: Tanay Ved Source: Coin Metrics Translation: Shan Ouba, Golden Finance

Key Points:

• The realized market cap of Bitcoin has surpassed $1 trillion, reflecting the deepening capital commitment and confidence of long-term holders, while the total market cap of the entire crypto market is also approaching $4 trillion.
• Demand for Bitcoin (BTC) and Ethereum (ETH) has surpassed new coin issuance, primarily driven by ongoing spot ETF inflows and increasing accumulation by corporate treasuries.
• The market leader pattern begins to spread, with Ethereum showing relative strength, and altcoins like SOL and XRP attracting more funds due to the increase in spot trading volume.
• The "GENIUS Act" establishes the first federal regulatory framework in the U.S. for fiat-backed stablecoins, bringing compliance clarity and creating a larger space for participation and competition in the stablecoin market valued at over $250 billion.

Introduction

The cryptocurrency asset market has first approached the $4 trillion mark, marking an important milestone in the history of the industry's development. This round of increases stems from the combination of various structural and cyclical forces: from the continuous inflow of funds into spot Bitcoin and Ethereum ETFs, to the accelerated accumulation by treasury-type cryptocurrency companies, and key regulatory breakthroughs such as the "GENIUS Act." It can be said that the "tailwind" factors driving the crypto market are strengthening.

This article will break down the key market forces and on-chain capital flows driving this round of expansion.

Bitcoin has achieved a market capitalization exceeding 1 trillion USD, with market activity continually expanding

Bitcoin (BTC) has reached a new high of $123,000, with a total market capitalization climbing to $2.38 trillion. Its realized market cap (the total value of each Bitcoin calculated at the price of its last on-chain transfer) has also surpassed $1 trillion for the first time. This data indicates that even at high levels, a significant amount of capital continues to flow into the market, highlighting increased confidence in Bitcoin's long-term role as a global asset, especially against the backdrop of growing ETF investments and institutional interest.

Market activities are also showing early signs of "leading spread." Ethereum (ETH) has begun to exhibit relative strength, with the ETH/BTC exchange rate rising by 73% since May, and ETH breaking $3900. This momentum is supported by multiple factors, including record inflows into ETFs, accelerated corporate treasury adoption, and positive developments for the Ethereum ecosystem (especially stablecoins) following the passage of the "GENIUS Act."

This "diffusion" trend is also reflected in the spot trading data: not only is the trading volume of BTC still strong, but the trading volumes of ETH and large altcoins such as SOL and XRP have also seen significant growth in the past few weeks. Meanwhile, Bitcoin's market dominance has dropped to 59%, while the total market cap of altcoins is approaching $1.6 trillion. Although there are early signs of a "leading diffusion", it remains to be seen whether this trend will continue.

The table below summarizes the market statistics of the top 20 tokens by market capitalization, excluding stablecoins and other on-chain derivatives:

Demand Acceleration: Dual Boost from ETFs and Corporate Treasuries

One of the key forces driving the demand for Bitcoin (BTC) and Ethereum (ETH) is Exchange-Traded Funds (ETFs). After a brief slowdown in March and April, the inflows into Bitcoin ETFs accelerated again in May, pushing the total holdings of U.S. spot Bitcoin ETFs to over 1.27 million BTC (approximately 6.4% of the total supply). Among them, BlackRock's iShares Bitcoin Trust (IBIT) remains the largest holder, currently holding about 735,000 BTC (worth approximately $87 billion).

Ethereum (ETH) is also experiencing a similar surge in demand. Over the past few weeks, spot Ethereum ETFs have seen consecutive net inflows, with some periods even surpassing Bitcoin's inflows. The total holdings of ETH ETFs have reached 5.8 million ETH, accounting for about 4.8% of the total ETH supply, with most of the growth concentrated in recent months - even though these ETFs were launched over a year ago.

The demand for ETH is also supported by an increasing number of enterprise treasuries focused on Ethereum, causing the accumulation rate of ETH to exceed the new issuance. Unlike enterprise treasuries that passively hold BTC, ETH treasuries earn native yields through staking and DeFi, and this model has now extended to other major token ecosystems such as Solana (SOL), TRON (TRX), and Ethena (ENA).

On-chain holdings: Divided by address balance

As shown in the picture above, the supply held by small BTC holders (<1 BTC) and large holders (1,000–10,000 BTC) has gradually decreased over the past year, indicating that as prices rise, the market has entered a distribution phase. In contrast, ETH shows signs of re-accumulation, especially among large holders (10,000–100,000 ETH), whose supply share has risen to over 22%. The supply held by small ETH holders (<1 ETH) has also been continuously increasing, a trend that has not been interrupted since 2021.

The "GENIUS Act" Opens a New Era for Stablecoins

The "GENIUS Act" was officially signed into law on July 18 and established the first federal regulatory framework for fiat-backed stablecoins in the United States. The act creates a fair competitive environment for stablecoin issuers, requiring:

• Full reserve support
• Reserve assets must be low-risk, short-term U.S. Treasury bonds or cash
• Conduct regular audits
• The issuer must obtain a license

This is similar to the impact generated by the approval of the spot Bitcoin ETF, bringing regulatory clarity and legitimacy to the dollar-denominated stablecoin market.

Recently, the supply of stablecoins has increased significantly, as can be seen from the 30-day rolling supply change. Currently, the total supply has exceeded 25.5 billion USD.

This regulatory framework is expected to enhance public trust in fiat-backed stablecoins, lower the barriers to entry for new participants, and bring more competition to the payments market. From existing issuers (such as Tether and Circle) to potential new entrants (such as regulated banks and fintech companies), this competition is likely to drive down transaction costs, improve the payment experience for consumers and businesses, and further strengthen the global demand for the US dollar.

Among the existing stablecoin issuers, Circle and Paxos seem to be best positioned to meet the requirements of the GENIUS Act, as USDC and PayPal USD (PYUSD) have long adopted full reserve backing and regularly provide audit reports. Circle is actively applying for a federal trust bank charter from the Office of the Comptroller of the Currency (OCC) to fully comply with the GENIUS Act and provide custody services to institutional clients. Other major issuers are also making structural adjustments to comply with the new legal requirements.

For example, Anchorage Digital, a crypto bank that has obtained federal licensing, has partnered with Ethena Labs to launch USDtb through its stablecoin issuance platform. Because Anchorage provides federal regulation and reserve management, Ethena's USDtb has become one of the first stablecoins fully compliant with the GENIUS Act. This issuance model offers a one-stop compliance solution for projects looking to continue operating in the U.S. market.

In contrast, Tether (USDT), which occupies about 68% of the stablecoin market, faces a more complex adjustment path. USDT has long operated outside the U.S. regulatory framework, with its reserve assets including non-GENIUS standard assets like Bitcoin and precious metals. In response, Tether plans to launch a compliant stablecoin aimed at institutional payments and interbank settlements, which will adhere to all the requirements of the GENIUS Act. The existing USDT, with a scale of 162 billion dollars, will continue to operate overseas, primarily serving emerging markets.

Stablecoin issuers have three years to meet the compliance requirements of the GENIUS Act. After that, only stablecoins that meet the GENIUS standards will receive support from exchanges and custodians, providing ample time for all parties to adjust.

Conclusion

Recently, the total market capitalization of the cryptocurrency market has surged to $4 trillion, reflecting the increasing market confidence of the entire asset class. The demand from ETFs and corporate treasuries continues to exceed the new supply, further improving the supply-demand structure of BTC and ETH. Valuation indicators such as Bitcoin's market cap to realized value ratio (MVRV) indicate that the market is not yet overheated.

Although the market is still dominated by strong ETF inflows and long-term holders, the leadership of the market is showing a gradual trend of dispersion.

In addition, the passage of the GENIUS Act marks a critical turning point for U.S. crypto regulation: it not only brings a clear regulatory framework for stablecoins but also paves the way for a competitive landscape and deeper integration with traditional finance. Although there may still be volatility in the short term, the combination of solid structural demand, a clear regulatory outlook, and an expanding range of participants suggests that the market will continue to strengthen in the future.