However, this could be a good sign that selling pressure on the cryptocurrency market is easing and it will soon enter a bullish cycle phase, analysts suggested.
The rate of reduction is accelerating: over the last 11 days, the supply of $USDT has decreased by almost $870 million. This indicates that the current dynamic is not just an echo of previous investor decisions, but an actively developing trend, CryptoQuant emphasizes.
Analysts have seen a connection between the drop in the market capitalization of $USDT and the decrease in Bitcoin's price. CryptoQuant explained: stablecoins are a key source of liquid funds in the cryptocurrency market, so a trend of decreasing market capitalization can seriously impact the market as a whole. The reduction in $USDT supply is equivalent to money exiting the crypto market. If investors are massively returning $USDT to the issuer in exchange for dollars, the volume of $USDT in circulation falls, as does the demand for Bitcoin:
"Historically, periods of sustained growth in $USDT supply coincided with a strengthening of the Bitcoin price, while prolonged phases of reduction were accompanied by weakening demand, deeper correction, and a worsening overall market environment. However, the most serious declines in the volume of $USDT in the past often coincided with moments when seller pressure was closer to being exhausted than to further intensification."
CryptoQuant asserts that Bitcoin's weak attempts at a price bounce are precisely due to insufficient stablecoin liquidity volume—thus, it's not possible to form sustained spot demand. To climb out of such a hole, it is necessary for the market capitalization of $USDT to start growing steadily over a two-month period, investment specialists concluded.
The cryptocurrency market is showing signs of completing a bear phase, according to analysts at the British company Wintermute. Major cryptocurrencies have managed to maintain resilience amid economic shocks, such as the unchanged lending rates in the USA—and this is a favorable sign, experts say.
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