CryptoQuant Says Market At Crucial Pivotal Point, Recovery Confirmed?

Tether’s USDT market cap growth is slowing down, causing a liquidity crunch in the market and subsequently stagnating Bitcoin (BTC) and other cryptocurrencies.

That’s according to a report from on-chain analytics firm CryptoQuant, which noted that BTC is at a critical point —between the bottom and further decline. This is because stablecoin liquidity is declining, and without liquidity entering the market, Bitcoin lacks the necessary conditions for a price rally.

More Pain to Come, Or Recovery Ahead?

Stablecoins are a fundamental pillar for crypto as companies like Tether and Circle provide the liquidity for the market. But, it seems Tether’s USDT is slowing down in terms of market cap. 

The report also noted that USD Coin (USDC) has been growing 5.6% monthly. Nevertheless, USDT remains the largest stablecoin with over US$110B (AU$162B), while USDC has US$33.95B (AU$50.11B).

The lack of corresponding growth in USDT market cap may delay or dampen the potential for a significant Bitcoin price rally.

CryptoQuant

However, CryptoQuant noted that Bitcoin could potentially be signalling a price bottom as well. This is because large investors realise losses and margins turn negative for traders. It noted that BTC hit a four-month low at US$53k (AU$78k) liquidating new and large investors. 

The Profit & Loss (P&L) Index is hovering around its 365-day moving average. A crossover to the downside typically aligns with major corrections (e.g., May-July 2021) or the onset of bear markets (e.g., November-December 2021).

CryptoQuant

Finally, the report added that mid and large-sized BTC miners selling a portion of their holdings contributes to more downward pressure. Notably, the Fear and Greed index is at 51, signalling cautiousness or doubt among investors as uncertainty grips the market.

Inflows Keep Coming

According to data from SoSo Value, Bitcoin ETFs saw US$310.21M (AU$458.46M) in net inflows on July 12, marking its sixth consecutive day of inflows and a total of US$15.81B (AU$23.36).

BlacRock’s IBIT is leading in terms of net inflows, with US$120M (AU$177M).

Related: BlackRock’s IBIT on Track to Hold $18 Billion in Bitcoin.

Notably, the surge in inflows came a day after CFTC’s Chairman Rostin Behman classified Bitcoin and Ethereum (ETH) as commodities rather than securities, a statement met with positive reactions from the crypto community. 

Related: CFTC “Happy” to Take Over from SEC as Crypto Regulator, Says 80% of Coins are Commodities.

Since then, Bitcoin’s price has retook the US$60k barrier. Data from CoinMarketCap shows that BTC is trading at US$61,043 (AU$90,204), a 2.76% change from yesterday and an increase of roughly 9.46% on the weekly timeframe. The 24-hour trading volume has soared almost 30% to US$22.2B (AU$32.8B).