As a researcher with a background in financial markets and cryptocurrencies, I believe that the tight U.S. monetary policy is currently the primary factor hindering Bitcoin’s price rally. The reduction in stablecoin supply due to rising interest rates has significantly impacted the cryptocurrency market, making it difficult for Bitcoin to enter a bull market.
The analysis from CryptoQuant suggests that Bitcoin‘s price has been relatively unchanged since reaching its high in March, likely because of strict monetary policies implemented by the U.S., resulting in a diminished supply of stablecoins.
“According to reports from July 3, the primary cause preventing Bitcoin from advancing farther is the United States’ increasingly stringent monetary policy initiated in March 2022.”
The reduction in the overall stablecoin supply became apparent starting in early 2022, as the Federal Reserve initiated rate hikes.
Conditions for $BTC to Rise: Stablecoin Liquidity
In simpler terms, for Bitcoin to experience significant growth, it’s crucial that there’s an uptick in the amount of stablecoins in circulation and their liquidity.
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— CryptoQuant.com (@cryptoquant_com) July 3, 2024
US Monetary Policy Impact
In the second half of 2023, the stablecoin supply experienced a resurgence. However, interest rates on these digital currencies continue to hover above 5%, refusing to decrease despite the passage of more than a year.
As a financial analyst, I’ve observed that Bitcoin (BTC) has experienced a steady upward trend. This growth can be attributed to investors’ anticipation of decreasing interest rates and the infusion of liquidity into financial markets due to expansive fiscal policies.
A rise in the amount and availability of stablecoins due to more permissive monetary policies in the United States is essential for Bitcoin to initiate a bull market.
As a researcher studying the Bitcoin market, I would advise that we may witness continued sideways trading or potential corrections in the near term. However, it is essential to maintain a long-term outlook and remain patient for potential growth opportunities.
With decreased interest rates, holding cash as an investment loses some appeal, making riskier options like cryptocurrencies or tech stocks more enticing.
The Fed is expected to lower interest rates in September, providing economic data remains positive.
Bitcoin has oscillated between the high $50K level and the low $70K level for the past four months.
Stablecoin Ecosystem Outlook
As a researcher studying the cryptocurrency market, I’ve noticed that stablecoin market capitalization has been gradually climbing upwards over the past few months. At present, it amounts to approximately $161 billion, which equates to around 7% of the entire crypto market’s value. However, this is significantly lower than the peak of $350 billion we saw in 2022.
Tether continues to dominate the market with approximately 70% market share, leaving other competitors significantly behind. Notably, the circulating supply of USDT has reached a new peak at around $112 billion.
As a researcher, I’ve discovered that Circle, my closest competitor in the stablecoin market, boasts approximately a 20% market share and a circulating supply worth around $32.5 billion. On the other hand, DAI, Maker’s stablecoin offering, holds the third largest market cap within this sector, valued at roughly $5 billion, representing slightly over 3% of the total market share.
As a researcher exploring the future of digital currencies, I came across a prediction made by Circle CEO Jeremy Allaire in June. He suggested that stablecoins could comprise around 10% of the global “economic money” within the next ten years or so.
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2024-07-07 16:29