Essential insights:
Bitcoin and altcoins are trailing behind gold and stocks in achieving new all-time highs.
Studies indicate that liquidity trends play a role, with traders withdrawing stablecoins.
Historically, conventional risk assets need to “cool down” before crypto experiences a surge.
Bitcoin (BTC) is declining as the crypto markets struggle to follow the rise of gold and stocks. Is the bull market coming to an end?
Recent analysis from on-chain analytics platform CryptoQuant identifies four critical factors for the downturn of Bitcoin and altcoins: Fed rate cuts, stablecoin reserves, leveraged traders, and historical trends.
Crypto remains at the “end of the liquidity pipeline”
Bitcoin has found itself sidelined recently as liquidity dynamics keep bulls from approaching all-time highs.
Meanwhile, both gold and U.S. stock markets continue to reach new all-time highs, raising concerns about crypto’s status as a mainstream asset class.
According to CryptoQuant contributor XWIN Research Japan, crypto is merely repeating past patterns.
“In the initial phase of rate cuts, institutional capital typically shifts first into highly liquid assets like equities and gold,” they noted in one of their Quicktake posts regarding interest rate cuts by the U.S. Federal Reserve.
“Crypto—especially altcoins—sits at the end of the liquidity pipeline, benefiting only when risk appetite expands.”
XWIN compared the current market conditions for Bitcoin and the largest altcoin Ether (ETH) to those from a year prior, identifying notable similarities.
“The pattern reflects 2024: a rally following the Fed’s rate cut, succeeded by a correction as liquidity fails to fully cycle into crypto. Only after traditional assets have cooled did BTC and ETH outperform,” they emphasized.
As previously reported by Cointelegraph, Bitcoin is known to follow gold upward after a delay of several months.
”Lag and leap” for Bitcoin compared to stocks?
XWIN also highlighted stablecoin reserves as a contributing factor to the delayed response to the risk-asset surges.
Related: Bitcoin Bollinger Bands tighter than ever as trader eyes $107K ‘max pain’
This month, the overall stablecoin supply reached a historic $308 billion. However, simultaneously, more stablecoins are exiting exchanges than entering, indicating a risk-off or profit-taking mentality among traders.
“Liquidity is being held off-exchange—bridged, sidelined, or utilized in private markets—rather than actively employed to purchase BTC or ETH,” they remarked.
Accumulation is similarly affected, as data from derivatives platforms reveal a trader inclination towards “hedging and leverage strategies,” a typical response to sideways market trends.
“History indicates Bitcoin typically ‘lags, then leaps,’” XWIN concluded.
“After equity ATHs, BTC has historically increased by +12% in 30 days and +35% in 90 days. Short-term challenges persist—QT, Treasury liquidity absorption, and impending options expiry—but the structural environment is favorable for crypto once liquidity cycles align.”
As Cointelegraph has reported, this Friday’s $22.6 billion options expiry is crucial, potentially influencing prices in the near future.
This article does not provide investment advice or recommendations. Every investment and trading action carries risk, and readers should undertake their own research before making decisions.
