Bitcoin (BTC) fell below the $90,000 level once again during the early hours of Asian trading, despite positive macroeconomic catalysts.
An analyst emphasized that the ongoing weakness in Bitcoin is rooted in the decline of stablecoin inflows and pointed out that fresh liquidity is necessary for a new upward rally.
The Main Catalysts Needed for Bitcoin to Rise Again
According to BeInCrypto Markets data, December is a period of significant volatility for the leading cryptocurrency. After the downward trend of the last two months, Bitcoin experienced its largest monthly loss of the year in November.
At the time of writing, BTC is trading at 89,885 dollars, experiencing a 2.7% drop in the last 24 hours. This decline is notable despite the Federal Reserve's (Fed) decision to cut interest rates for the third time this year.
The bank lowered interest rates by 25 basis points to a range of 3.50–3.75 percent. Rate cuts are generally seen as a bullish catalyst for the cryptocurrency market. In fact, many anticipated a rise with this move.
However, prices moved in the opposite direction. If this is not the reason, what exactly does Bitcoin need to start a new rally?
According to Darkfost, what is needed is liquidity. According to the analyst, the inflows of stablecoins into cryptocurrency exchanges have decreased from 158 billion dollars in August to approximately 76 billion dollars today.
In other words, there has been a significant drop of 50% in just a few months. On the other hand, the 90-day average has also decreased from 130 billion dollars to 118 billion dollars, indicating a clear downward trend.
'One of the main reasons Bitcoin is struggling to recover right now is the lack of fresh liquidity entering the market. When we talk about liquidity in the cryptocurrency market, we are primarily referring to stablecoins,' he said.
The analyst also added that this sharp drop in stablecoin inflows indicates weakening demand. There is now a selling pressure that has not absorbed new capital on Bitcoin. Additionally, the recent small recoveries seem to be more due to a decrease in selling pressure rather than new purchases.
'The key factor for Bitcoin to be able to start a strong upward trend again is the influx of new liquidity into the market,' Darkfost stated.
BeInCrypto's latest report also indicated that stablecoin issuers continue to produce new tokens, and that major assets like Tether (USDT) and Circle's USDC have reached new record market values this month.
Still, the data reveals that a significant portion of this supply has been absorbed by cross-border payment demand. It also appears that a large part of the inflows has shifted towards futures rather than spot transactions in cryptocurrency exchanges.
In its latest report, the International Monetary Fund (IMF) stated: 'Asia has the highest volume of stablecoin activities, surpassing North America. However, when compared to Gross Domestic Product, Africa, the Middle East, and Latin America stand out. The majority of flows occur from North America to other regions,' it said.
In summary, the recent decline in Bitcoin clearly shows that macroeconomic catalysts are no longer sufficient to move the market. Data suggests that the fundamental condition for a sustained rally is an increasing stablecoin liquidity. Investor sentiment must also improve. Fear and low market interaction continue to prevent capital from flowing into Bitcoin.
