The combined supply of the top four stablecoin projects has remained virtually unchanged over the past 30 days, signaling a period of market stability. This stands in sharp contrast to the liquidity surge observed during the November-December rally. The drying up of new stablecoin liquidity poses a potential risk of renewed downside volatility following the release of U.S. inflation data.
U.S. Inflation Data Awaited Today
Bitcoin’s (BTC) swift recovery from below $90,000 earlier this week has reignited bullish sentiment. However, according to analyst Omkar Godbole, today’s U.S. inflation data, set to be released at 3:30 PM UK time, could introduce volatility if the numbers exceed expectations. This uncertainty is compounded by the stagnant large stablecoin supply, which points to a lack of new capital inflows.
Data from Glassnode reveals that the aggregate supply of the top four stablecoins—USDT, USDC, BUSD, and DAI—remains at approximately $189 billion, with a 30-day net change of only 0.37%. Stablecoins, pegged to external references like the U.S. dollar, are commonly used to finance cryptocurrency purchases and served as safe havens during the 2022 bear market.
The dwindling flow of new stablecoin liquidity ahead of the Consumer Price Index (CPI) announcement reflects a weakened buying environment. This trend contrasts sharply with the liquidity surge seen during the November-December rally. According to Glassnode, the rally on December 24 required nearly twice the capital inflow for a smaller price increase compared to prior months, highlighting the cooling of speculative demand.
Key Inflation Expectations
Advertisement Banner
The CPI data, expected at 3:30 PM UK time, predicts a 0.3% month-on-month increase for December, mirroring November’s trajectory. Year-on-year figures are projected to rise from 2.75% in November to 2.9%. The core CPI, which excludes volatile food and energy components, is anticipated to increase by 0.2% month-on-month and 3.3% year-on-year.
Higher-than-expected headline or core figures could dampen hopes of the Federal Reserve easing interest rates. Such concerns, bolstered by last Friday’s robust employment report, were partially responsible for BTC’s dip below $90,000 earlier this week.
The Significance of Stablecoin Liquidity
Stablecoin liquidity, often referred to as “dry powder” for crypto purchases, has significantly dried up compared to the $27.3 billion influx during the November-December rally, which helped push BTC from $70,000 to over $108,000. In contrast, the first quarter of 2024 saw a much smaller stablecoin inflow of $14.68 billion despite a 70% price surge to above $70,000.
As the crypto market braces for the U.S. inflation data, the role of stablecoin liquidity remains pivotal in determining price trajectories. The Bit Journal will continue to monitor these developments and provide insights into their impact on the market.
- https://twitter.com/Thebitjournal_
- https://www.linkedin.com/company/the-bit-journal/
- https://t.me/thebitjournal
Follow us on Twitter and LinkedIn and join our Telegram channel to get instant updates on breaking news!
The price predictions and financial analysis presented on this website are for informational purposes only and do not constitute financial, investment, or trading advice. While we strive to provide accurate and up-to-date information, the volatile nature of cryptocurrency markets means that prices can fluctuate significantly and unpredictably.
You should conduct your own research and consult with a qualified financial advisor before making any investment decisions. The Bit Journal does not guarantee the accuracy, completeness, or reliability of any information provided in the price predictions, and we will not be held liable for any losses incurred as a result of relying on this information.
Investing in cryptocurrencies carries risks, including the risk of significant losses. Always invest responsibly and within your means.
