Bitcoin (BTC) fell again below 90,000 USD during the early Asian trading hours today, despite positive macroeconomic factors.
An analyst pointed to the decrease in inflows of stablecoin as a key factor behind Bitcoin's continued weakness. The analyst believes that new liquidity is crucial for a rise.
The important factor Bitcoin needs to turn positive again
Data from BeInCrypto Markets shows that December has been a volatile month for the largest cryptocurrency. This follows two consecutive months of losses. Bitcoin also had its largest monthly decline of the year in November.
As this text is written, BTC is trading at 89 885 USD. The price has fallen by 2.7% over the last day. The decline occurs despite the fact that the US central bank lowered the interest rate for the third time this year yesterday.
The bank lowered the interest rate by 25 basis points to a target range of 3.50–3.75%. Interest rate cuts are often seen as positive for the crypto market. Many therefore believed in a recovery.
The price moved in the opposite direction. If this is not enough, what does Bitcoin need to reverse the trend?
According to Darkfost, this is about liquidity. The analyst explained that inflows of stablecoin to exchanges have decreased from 158 billion USD in August to about 76 billion USD today.
This is a decrease of 50% in just a few months. At the same time, the 90-day average has fallen from 130 billion USD to 118 billion USD. This indicates a clear downward trend.
“One of the main reasons Bitcoin is struggling to recover now is the lack of new liquidity. When we talk about liquidity in the crypto market, we usually mean stablecoin,” it stated in the post.
The analyst added that the significant drop in stablecoin inflows indicates weaker demand. Bitcoin is now facing continued selling pressure that new capital is not absorbing. Furthermore, the trend shows that minor recoveries are often due to fewer selling rather than more buying.
“For Bitcoin to start a real rise, new liquidity into the market is required,” pointed out Darkfost.
BeInCrypto also highlighted in a new report that stablecoin issuers continue to create new tokens. The market capitalization for large assets like Tether (USDT) and Circle's USDC is reaching new highs this month.
Despite this, data shows that much of the supply is absorbed by demand for cross-border payments. Additionally, a large part of the inflows goes to derivative exchanges instead of to spot platforms.
“Asia leads with the highest volume for stablecoin activity, ahead of North America. In relation to GDP, however, Africa, the Middle East, and Latin America stand out. Most of the flow goes from North America to other regions,” wrote the IMF in a new report.
Thus, Bitcoin's recent drop shows that macro factors no longer solely drive the market. Data clearly shows that new liquidity from stablecoin is lacking for a strong and lasting increase. Market sentiment must also improve. Fear and low activity still prevent capital from flowing into Bitcoin.
