Key points:
Bitcoin and altcoins are trailing behind gold and stocks in reaching new all-time highs.
Research indicates that liquidity trends are a key factor, as traders are pulling out stablecoins.
Historical data shows that traditional risk assets often need to stabilize before a crypto price surge occurs.
Bitcoin (BTC) is declining as the crypto market fails to replicate the performance of gold and stocks. Is the bull market over?
Recent research from the on-chain analytics firm CryptoQuant outlines four main reasons why Bitcoin and altcoins are in the red — including Fed rate cuts, stablecoin reserves, leveraged traders, and historical patterns.
Crypto still at “end of liquidity pipeline”
Bitcoin has found itself stagnant lately as liquidity dynamics deter bulls from testing all-time highs.
Concurrently, both gold and US stock markets are achieving continuous all-time highs, raising concerns that crypto has yet to cement its status as a mainstream asset class.
However, CryptoQuant contributor XWIN Research Japan offers another perspective, asserting that crypto is simply following historical trends.
“In the initial phase of rate cuts, institutional capital typically flows first into high-liquidity assets like equities and gold,” they noted in their Quicktake blog, referencing interest-rate cuts by the US Federal Reserve.
“Crypto—especially altcoins—sits at the end of the liquidity pipeline, benefiting only when risk appetite increases.”
XWIN compared the current market situation for Bitcoin and the largest altcoin, Ether (ETH), to last year and found notable similarities.
“The pattern resembles 2024: a pre-emptive rally post-Fed’s rate cut, followed by a correction as liquidity failed to properly shift into crypto. BTC and ETH outperformed only after traditional assets cooled off,” they remarked.
As Cointelegraph has reported, Bitcoin has been known to follow gold’s movements with a several-month lag.
”Lag and leap” for Bitcoin vs. stocks?
Continuing, XWIN pointed to stablecoin reserves as another reason for the delayed reaction to the recent surge in risk assets.
Related: Bitcoin Bollinger Bands tighter than ever as trader eyes $107K ‘max pain’
This month, the overall stablecoin supply reached an all-time high of $308 billion. Yet, more stablecoins are currently exiting exchanges than entering, indicating a risk-averse or profit-taking mindset among traders.
“Liquidity is being sidelined off-exchange—bridged, parked, or utilized in private markets—rather than actively used to purchase BTC or ETH,” they stated.
These challenges are also affecting accumulation, with data from derivatives platforms revealing a trader preference for “hedging and leverage strategies,” a typical reaction to flat market conditions.
“Historical trends indicate that Bitcoin usually tends to “lag, then leap,” XWIN concluded.
“Following equity all-time highs, BTC has historically gained +12% in 30 days and +35% in 90 days. Although short-term challenges remain—QT, Treasury liquidity absorption, and impending options expiry—the structural landscape favors crypto once liquidity cycles align.”
As Cointelegraph has reported, this Friday’s $22.6 billion options expiry is significant and may impact future price movements.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
