Welcome back! This is Frances Yue, crypto reporter at MarketWatch, bringing you the latest installment of Distributed Ledger.

Bitcoin (BTCUSD) has continued to trade sideways, as the largest crypto by market capitalization has consolidated in the range between $50,000 and $72,000 during the past seven months.

However, a record amount of stablecoin supply has been signaling a particularly bullish trend for the crypto sector, according to Alice Liu, research lead at CoinMarketCap. Bitcoin may surpass its record high of $73,798, reached in March, by the end of this year, according to Liu.

Stablecoins refer to cryptocurrencies whose values are pegged with another asset, such as a fiat currency like the U.S. dollar DXY or a commodity like gold (GC00).

Find Frances Yue on X to share your thoughts on stablecoins and this newsletter.

Record stablecoin supply

The total market capitalization of major stablecoins linked with the U.S. dollar hit a record high in September, according to data from CryptoQuant. The number stood at around $169 billion as of Tuesday, up $40 billion or 31% year to date.

"An increase in stablecoin market capitalization is typically associated with higher bitcoin and crypto prices, as it provides more liquidity to the markets," analysts at CryptoQuant wrote in a note.

Meanwhile, the balance of USDT (USDTUSD), the largest stablecoin by market cap on centralized exchanges, also hit a record high at $22.7 billion earlier this month. It is up 54%, or $8 billion, so far this year, according to data from CryptoQuant.

It is also bullish for bitcoin, as historically, the balance of stablecoin supply on centralized exchanges is positively correlated with bitcoin's price, noted analysts at CryptoQuant.

With a record amount of stablecoin supply on the sideline, "crypto investors may be doing very similar to what Warren Buffett is doing, which is keeping liquidity on the side to buy, just in case there's any good opportunity coming up," Liu said in a phone interview.

Read: A record $6 trillion in 'cash on the sidelines' won't help fuel the rally in stocks, analyst says

"With over $160 billion in stablecoins on the side, that's potentially a lot of liquidity to come into bitcoin, ether or other coins when the timing is right," she said. "To me, this is a very strong bullish signal, considering the amount of capital to be unleashed."

Cycle peak next year?

Many have argued that bitcoin is likely to see price appreciation this and next year, as the crypto went through its fourth halving on April 19 of this year.

Halving is a mechanism written into the Bitcoin blockchain's algorithm to control the coin's supply, which has a cap of 21 million. At halvings, the reward for bitcoin mining is cut in half, meaning miners will receive 50% fewer bitcoins for verifying transactions.

Halvings are scheduled to happen after every 210,000 blocks that are mined - or about every four years - until the maximum supply of bitcoin is all released.

Historically, bitcoin has seen price appreciation in the months after halving. The crypto has tended to reach a cycle peak between 518 and 546 days after a halving event, according to Liu.

However, this year has been different, with bitcoin already reaching an all-time high at $73,798 in March before the halving.

Based on CoinMarketCap's model, bitcoin's next peak may arrive sooner than expected, potentially between mid-May and mid-June of next year, noted Liu.

Crypto in a snap

Bitcoin (BTCUSD) has gained 2.7% over the past seven days, to around $61,829 at the time of writing Wednesday. Ether (ETHUSD) has added 2.1% over the past seven days, to around $2,435, according to Dow Jones Market Data.