According to an analysis by CryptoQuant, Bitcoin has been stagnant in its trading since reaching a new high in March. The performance of Bitcoin is strongly linked to U.S. monetary policy and the liquidity of stablecoins. The failure of Bitcoin to break out of its current trading range is largely due to the tightening monetary policy in the U.S. since March 2022. The rise in interest rates has resulted in a decrease in the total supply of stablecoins, which play a crucial role in providing liquidity in the cryptocurrency market.
A recent tweet by @MAC_D46035 emphasized the need for an increase in stablecoin liquidity and circulating supply for Bitcoin to rally significantly. The increase in interest rates has limited the availability of stablecoins, which are commonly used to facilitate trading and transactions within the crypto ecosystem. As the supply of stablecoins decreases, so does the liquidity in the market, making it challenging for Bitcoin to gain momentum.
Despite the restrictive monetary environment, Bitcoin has experienced price increases over the past year due to expectations of lower interest rates and continued fiscal stimulus, which has sustained demand for Bitcoin. However, for Bitcoin to undergo a substantial rally, an increase in stablecoin liquidity and circulating supply through more accommodating U.S. monetary policy is necessary. Without these signals, Bitcoin is likely to continue trading sideways or even experience further correction. Investors are advised to maintain a long-term perspective, closely monitoring changes in monetary policy and stablecoin supply as crucial indicators for Bitcoin’s future performance.
The future performance of Bitcoin is heavily dependent on U.S. monetary policy and the availability of stablecoin liquidity. Until these factors become more favorable, Bitcoin is expected to remain in its current trading pattern. Investors should keep a close watch on these indicators and maintain a long-term view of the market.
