Key Points
- Stablecoin liquidity might be hindering Bitcoin’s growth, according to CryptoQuant founder Ki Young Ju.
- Bitcoin ETFs have significantly influenced Bitcoin’s price, but a slowdown in demand could risk stagnation.
Stablecoins are integral to Bitcoin’s market fluctuations, serving as a conduit for liquidity flow into Bitcoin and a value buffer during bearish periods. However, recent analysis suggests that stablecoin liquidity may be impeding Bitcoin’s growth.
Stablecoin Reserves and Bitcoin
CryptoQuant founder Ki Young Ju recently proposed that stablecoins might not be able to drive bullish momentum for Bitcoin. This hypothesis takes into account the most optimistic scenario, considering both Bitcoin and stablecoin reserves.
The analysis reveals that Bitcoin reserves have surpassed stablecoin reserves by a factor of six, indicating that current stablecoin reserves may be insufficient to meet peak Bitcoin demand. As of writing time, Bitcoin’s market cap stands at $1.38 trillion, while the total market cap for stablecoins is $172.887 billion.
Impact of Bitcoin ETFs
The study also investigates the role of ETFs in Bitcoin’s price movements. It observed that a decrease in Spot ETFs demand over the past two weeks coincided with weak demand overall. If Spot ETF demand continues to decrease, Bitcoin’s price might risk stagnation.
For instance, Bitcoin ETFs recently saw a decline in demand at the end of October, after a week of positive flows. Current ETF data shows that Bitcoin ETFs ended the week with net outflows, with $54.9 million in outflows recorded on Friday. At the same time, Bitcoin has been struggling to reclaim its position above $70,000, indicating a slowdown in demand.
Despite this, Bitcoin ETFs have increased by 62% since their approval earlier this year, holding over $24.4 billion as of writing time. This significant growth suggests increasing demand from institutional investors.
The recent outflows are likely connected to the uncertainty surrounding the election period. It remains to be seen how the situation will evolve post-elections. Additionally, institutional investors are reacting to the resurgence of global liquidity, which could be a positive sign for holders, as lower interest rates are fostering a risk-on sentiment.
