Here’s The Key To Reviving Bitcoin’s Bull Market: Analyst

With Bitcoin trading sideways over the past few months, traders are waiting for a signal to re-enter the market before the cryptocurrency regains its bullish momentum from earlier this year.

In a note published on Wednesday, an analyst from CryptoQuant highlighted one signal worth paying attention to: the liquidity of the stablecoin.

Stablecoins: The Key to Bitcoin’s Rise

“The bottom line is that for #Bitcoin to seriously appreciate in value, we need to see an increase in stablecoin liquidity and circulating supply.” books Mac.D analyst for CryptoQuant.

According to the author, Bitcoin has not been able to break new highs above $73,700 since mid-March 2024 due to the tightening of monetary policy conditions in the United States over the previous two years.

Rising interest rates around the world have hurt liquidity across the economy, including stablecoin liquidity and the total circulating supply of stablecoins.

Stablecoins are fiat-pegged cryptocurrencies that exchanges use as dollar equivalents in the cryptocurrency trading economy, and which traders often hold in preparation for buying BTC at a later date.

Tether (USDT) – the world’s most popular stablecoin pegged to the US dollar – saw its market cap shrink from $83 billion in April 2022 to $65 billion in November 2022.

Its total value quickly recovered to over $82 billion in Q2 2023, then steadily rose again to over $112 billion over the past three quarters, rising alongside the price of Bitcoin during these periods. However, overall stablecoin liquidity remained mostly flat during Q2 2024, as did the price of Bitcoin.

Liquidity conditions and Bitcoin price

“The reason why Bitcoin has been so high over the past year is, first, the expectation of lower interest rates, and second, the fact that fiscal policy, unlike monetary policy, has continued to bring liquidity to the market,” the analyst wrote.

In a recent article, Arthur Hayes, co-founder of BitMEX, claimed that the ongoing fiscal spending by the US government will continue, which will continue to drive up the prices of assets like Bitcoin.

However, analyst McD believes that the next market rally will also require “more accommodative monetary policy” in the United States. At the moment, markets pridect The Federal Reserve may only start cutting interest rates in September.

“Until we see these signals, Bitcoin is likely to trade sideways or correct further, and investors would be wise to take a long-term view of the market,” McDee concluded.