Bitcoin’s price has been stagnant since its peak in March, and analysts believe this is due to the tight U.S. monetary policy that has reduced stablecoin supply. According to CryptoQuant analysts, the Federal Reserve’s decision to raise interest rates in March 2022 led to a decline in stablecoin supply, which has affected Bitcoin’s ability to rally further.
In order for Bitcoin to experience a significant rally, analysts suggest that there needs to be an increase in stablecoin liquidity and circulating supply. The current high interest rates in the U.S. have kept stablecoin supply low, making it difficult for Bitcoin to enter a bull market.
Despite some fluctuations, Bitcoin has been trading between the high $50K and low $70K levels for the past four months. Analysts believe that lower interest rates, expected to be implemented by the Fed in September, could bring more liquidity to the markets and make high-risk assets like crypto more attractive to investors.
The stablecoin market has been steadily growing, with a total market capitalization of $161 billion, representing around 7% of the total crypto market. Tether remains the dominant stablecoin with a market share of almost 70%, while Circle and Maker’s DAI follow behind.
Circle CEO Jeremy Allaire has predicted that stablecoins could account for 10% of global economic money within the next decade. This shows the potential for stablecoins to play a significant role in the financial ecosystem in the coming years.
Overall, analysts suggest that a more accommodative monetary policy in the U.S. could help increase stablecoin liquidity and circulating supply, which in turn could benefit Bitcoin’s price and potentially lead to a bull market. Investors are advised to take a long-term perspective while waiting for market conditions to improve.
As the crypto market continues to evolve, the role of stablecoins and their impact on Bitcoin’s price dynamics will be closely monitored by investors and analysts alike. With the potential for lower interest rates and increased liquidity in the near future, the next bull run for Bitcoin may not be far off.