Key points:
Bitcoin and altcoins are trailing behind gold and stocks in reaching new all-time highs.
Research indicates that liquidity trends are partly to blame as traders withdraw from stablecoins.
Historical data demonstrates that conventional risk assets typically need to “cool down” before a surge in crypto.
Bitcoin (BTC) is declining as cryptocurrency markets struggle to mirror the performance of gold and stocks. Is the bull market finished?
New insights from the on-chain analytics platform CryptoQuant outline four primary reasons for the “red” status of Bitcoin and altcoins: Fed rate adjustments, stablecoin reserves, leveraged traders, and historical patterns.
Crypto remains at the “end of the liquidity pipeline”
Bitcoin has recently stagnated as liquidity dynamics keep bulls from challenging all-time highs.
Simultaneously, gold and US stock markets keep reaching new all-time highs, raising concerns that crypto has yet to achieve mainstream status.
CryptoQuant contributor XWIN Research Japan offers a different perspective, suggesting that crypto is merely repeating historical trends.
“During the initial phase of rate cuts, institutional funds generally move first into high-liquidity assets such as equities and gold,” they mentioned in one of their Quicktake blog entries, referencing interest rate reductions from the US Federal Reserve.
“Crypto—particularly altcoins—exists at the end of the liquidity pipeline, gaining traction only when risk appetite expands.”
XWIN compared the current state of Bitcoin and the leading altcoin Ether (ETH) to similar conditions from a year ago, identifying key patterns.
“The current setup resembles 2024: an initial rally following the Fed’s rate cut, succeeded by a correction as liquidity struggles to rotate fully into crypto. Only after traditional assets have cooled did BTC and ETH excel,” they noted.
As reported by Cointelegraph, Bitcoin has a historical tendency to follow gold higher after a delay of several months.
“Lag and leap” for Bitcoin compared to stocks?
XWIN highlighted stablecoin reserves as another element causing a delayed response to the risk-asset rally.
Related: Bitcoin Bollinger Bands at their tightest as traders target $107K ‘max pain’
The total stablecoin supply reached a record $308 billion this month. However, more stablecoins are exiting exchanges than entering, indicating a risk-off or profit-taking sentiment among traders.
“Liquidity is currently parked off-exchange—bridged, sidelined, or utilized in private markets—rather than actively being used to purchase BTC or ETH,” they commented.
Similar challenges hinder accumulation, as data from derivatives platforms show a trader preference for “hedging and leverage strategies,” a typical reaction to sideways market conditions.
“Historical trends indicate that Bitcoin tends to ‘lag, then leap,’” XWIN concluded.
“Following equity all-time highs, BTC has typically risen by +12% in 30 days and +35% in 90 days. Although short-term obstacles remain—QT, Treasury liquidity absorption, and impending options expiry—the structural environment favors crypto once liquidity cycles realign.”
As reported by Cointelegraph, this Friday’s $22.6 billion options expiry is critical and may influence prices going forward.
This article does not provide investment advice or recommendations. Every investment and trading decision involves risk, and readers should conduct their own research before making decisions.
