Bitcoin rally on hold until this occurs

Bitcoin rally on hold until this occurs

The Importance of Stablecoin Market Cap in Bitcoin’s Rally

Bitcoin, the world’s largest cryptocurrency, has been experiencing a period of stagnation recently, failing to regain its previous highs. However, an important indicator may hint at when a potential break in this pattern could occur. This indicator is the market cap of stablecoins, which has shown a correlation with Bitcoin’s price movements.

Bitcoin’s Recent Price Movements

Bitcoin recently witnessed a sharp decline, dropping from the $30,000 level to around $29,000. However, the cryptocurrency quickly recovered and reclaimed the $26,600 level in a short period of time. This recovery was initially triggered by the announcement of a 25 bps interest rate hike by the US Federal Reserve. Unfortunately, Bitcoin’s rally was short-lived, and it retraced its gains.

BTCUSD on TradingView

Bitcoin had been trapped in a phase of stagnation above $30,000 for over a month. The recent price plunge broke this streak. Although the cryptocurrency is now hovering around the $29,000 level, it is important to note that volatility hasn’t fully returned. Bitcoin is currently consolidating, albeit at a different level. When will this stagnation be broken, and the rally resume? The answer may lie in the total supply of stablecoins.

Stablecoin Market Cap and Bitcoin’s Rally

According to an analyst’s post on CryptoQuant, significant price increases in Bitcoin this year have usually coincided with an increase in the supply of stablecoins. The chart provided by the analyst illustrates that the recent major price surges were preceded by a significant local increase in stablecoin supply.

Stablecoin supply chart from CryptoQuant

A rise in stablecoin supply suggests two possibilities. First, it could indicate a fresh injection of capital into the market, with investors requesting the minting of more fiat-backed stablecoins. Second, it could indicate that holders of other cryptocurrencies, such as Bitcoin, are selling their assets to seek the relative safety provided by stablecoins. In either case, these investors who hold their capital in stablecoins eventually plan to re-enter the volatile side of the market.

Therefore, the total stablecoin supply can be seen as a store of buying pressure that can be deployed into assets like Bitcoin. Interestingly, it is not the increase in stablecoin supply itself that has fueled the price surges in Bitcoin this year. Instead, it is the subsequent decline in the supply that has been followed by these surges.

The Impact of Stablecoin Supply Trend

The chart shows that the decline in stablecoin supply has been accompanied by a transfer of capital into Bitcoin and other cryptocurrencies, resulting in bullish price movements. However, it is worth noting that the stablecoin supply has been on a net decline during this period, indicating that the available capital tied up in stablecoins is decreasing.

Based on this trend, if there is no significant cash injection into stablecoins in the near future, the Bitcoin rally may struggle to resume. The dry powder held in these tokens is gradually running out, potentially hampering any major price increases.


While Bitcoin’s recent price movements have shown signs of recovery, the correlation between stablecoin market cap and Bitcoin’s rally suggests that the future direction of the cryptocurrency may depend on the injection of fresh capital into the stablecoin market. The stablecoin supply is seen as a potential store of buying pressure that can be deployed into assets like Bitcoin. Therefore, if stablecoin supply fails to see another significant cash injection, the Bitcoin rally may face challenges. As of now, Bitcoin is trading around $29,200, reflecting a 1% decline in the last 24 hours.

_Stabilizing Bitcoin’s rally with the support of stablecoin market cap is crucial for the overall momentum of the cryptocurrency market. Investors and traders should closely monitor the developments in the stablecoin market to gain insights into potential market movements.

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