Highlights:
Bitcoin and altcoins are trailing behind gold and stocks in reaching new all-time highs.
Research indicates that liquidity trends are a contributing factor as traders withdraw from stablecoins.
Historical data suggests that traditional risk assets must “cool” before a crypto upsurge occurs.
Bitcoin (BTC) is experiencing a decline as the crypto markets struggle to mimic the performance of gold and stocks — is the bullish trend coming to an end?
Recent analysis from the on-chain analytics platform CryptoQuant highlights four main factors causing Bitcoin and altcoins to be in the “red” — Fed rate adjustments, stablecoin reserves, leveraged trading, and historical trends.
Crypto remains at the “end of the liquidity pipeline”
Bitcoin has recently become “stuck” as liquidity fluctuations deter bulls from challenging all-time highs.
Meanwhile, both gold and US stock markets continue to achieve repeated all-time highs, raising questions about whether crypto has truly become a mainstream asset class.
However, CryptoQuant contributor XWIN Research Japan offers a different perspective. It suggests that crypto is merely mirroring historical patterns.
“In the initial stages of rate cuts, institutional capital typically flows first into high-liquidity assets like stocks and gold,” it noted in one of its “Quicktake” blog entries, referring to the interest-rate cuts by the US Federal Reserve.
“Crypto—especially altcoins—sits at the end of the liquidity pipeline, benefiting only when risk appetite expands.”
XWIN compared the current setup of Bitcoin and the largest altcoin Ether (ETH) to conditions from a year ago and identified striking similarities.
“The trend resembles 2024: an initial rally following the Fed’s rate cut, succeeded by a correction as liquidity struggles to flow into crypto fully. BTC and ETH only outperformed after traditional assets cooled,” it added.
As reported by Cointelegraph, Bitcoin is known to follow gold upward with a time lag of several months.
”Lag and leap” comparison for Bitcoin vs. stocks?
XWIN pointed out that stablecoin reserves are another aspect contributing to the delayed response to rising risk assets.
Related: Bitcoin Bollinger Bands tighter than ever as traders eye $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-averse or profit-taking approach among traders.
“Liquidity is being held off-exchange—bridged, sidelined, or employed in private markets—rather than actively utilized to purchase BTC or ETH,” it summarized.
Similar challenges affect accumulation, as data from derivatives platforms reveal a trader preference for “hedging and leverage strategies” — a typical response to sideways market movements.
“Historical trends indicate that Bitcoin tends to “lag, then leap,” XWIN concluded.
“Following equity ATHs, BTC has historically risen +12% in 30 days and +35% in 90 days. While short-term obstacles persist—QT, Treasury liquidity absorption, and upcoming options expiry—the overall setup favors crypto as liquidity cycles align.”
As Cointelegraph previously reported, the $22.6 billion options expiry this Friday is significant and may influence future price movements.
This article does not provide investment advice or recommendations. All investment and trading actions carry risks, and readers should perform their own research when making decisions.
