Bitcoin (BTC) has dipped below $90,000 again, despite positive macroeconomic signals. Analysts attribute this weakness to a significant decrease in stablecoin inflows, suggesting that fresh liquidity is crucial for a sustainable price surge.
Key Factor for Bitcoin's Trend Reversal
Coinphoton data reveals that December is shaping up to be another volatile month for Bitcoin, following two months of consecutive declines. November saw the largest drop of the year for the cryptocurrency.
Currently, BTC is back above $90,000 but still down 2.7% over the past 24 hours. This decline occurred shortly after the Federal Reserve's third interest rate cut of the year, reducing rates by 25 basis points to a target range of 3.50%–3.75%. Typically, rate cuts are seen as positive for crypto, raising investor expectations for a price rebound.
However, the reality has diverged from these expectations. So, what is truly needed to reverse Bitcoin's current downtrend?
Darkfost's analysis points to liquidity as the vital component. Stablecoin inflows to exchanges have plummeted from $158 billion in August to roughly $76 billion currently – a 50% decrease in just a few months. The 90-day moving average has also dropped from $130 billion to $118 billion, confirming the downward trend.
- Key Issue: Lack of incoming liquidity
- Primary Liquidity Source: Stablecoins
Stablecoin Dynamics and Bitcoin's Price
The sharp decline in stablecoin inflows indicates weakening demand. Bitcoin faces continuous selling pressure without enough new capital to absorb it. Recent minor recoveries have primarily stemmed from reduced selling, rather than increased buying.
Darkfost emphasizes that new capital must flow into the market for Bitcoin to initiate a genuine uptrend.
Recent Coinphoton reports indicate that stablecoin issuers continue to mint new tokens, with market caps of major coins like Tether (USDT) and Circle's USDC hitting record highs this month. However, most of this supply is being absorbed by cross-border payment demand, with a significant portion flowing to derivatives exchanges instead of spot exchanges.
The IMF notes that Asia currently leads in stablecoin trading volume, surpassing North America. However, Africa, the Middle East, and Latin America are more prominent when considering GDP ratios. Much of the capital flows from North America to these regions.
Conclusion
Bitcoin's recent struggles suggest that macroeconomic factors alone are insufficient to influence the market. Data indicates that new stablecoin liquidity is the missing piece for a sustainable bullish reversal. Furthermore, improved market sentiment is needed, as caution and low participation levels currently hinder capital allocation to Bitcoin.
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