Highlights:
Bitcoin and altcoins are trailing behind gold and stocks in reaching new all-time highs.
Studies indicate that liquidity trends are contributing factors, as traders are pulling back on stablecoins.
Historical data suggests traditional risk assets must stabilize before a crypto uptick occurs.
Bitcoin (BTC) is declining as the crypto market struggles to mirror the performance of gold and stocks. Is the bull market coming to an end?
Fresh insights from the onchain analytics platform CryptoQuant outline four critical reasons behind the decline of Bitcoin and altcoins—Federal Reserve rate cuts, stablecoin reserves, leveraged traders, and historical patterns.
Crypto Positioned at the “End of Liquidity Pipeline”
Bitcoin has encountered stagnation recently as liquidity concerns keep bulls from pursuing all-time highs.
Meanwhile, both gold and the US stock markets are achieving new all-time highs, raising doubts about crypto’s positioning as a mainstream asset class.
CryptoQuant contributor XWIN Research Japan posits that crypto is merely following historical trends.
“During the initial phase of rate cuts, institutional capital typically flows first into liquid assets like equities and gold,” they noted in one of their Quicktake blog entries, referring to the US Federal Reserve’s interest-rate cuts.
“Crypto—particularly altcoins—exists at the end of the liquidity pipeline, benefiting only when the appetite for risk expands.”
XWIN analyzed the current market dynamics for Bitcoin and the prominent altcoin Ether (ETH) and found notable parallels from a year ago.
“The trend is reminiscent of 2024: a preemptive rally following the Fed’s rate cut, succeeded by a correction as liquidity fails to fully transition to crypto. BTC and ETH only outperformed after traditional assets stabilized,” they continued.
As reported by Cointelegraph, Bitcoin has historically been known to track gold, albeit with a few months of lag.
“Lag and Leap” for Bitcoin Compared to Stocks?
Continuing, XWIN pointed out that stablecoin reserves play a significant role in the delayed response to the risk-asset surge.
Related: Bitcoin Bollinger Bands reach tightest level as trader anticipates $107K ‘max pain’
The overall supply of stablecoins reached an all-time high of $308 billion this month. However, more stablecoins are being withdrawn from exchanges than deposited, signaling a cautious or profit-taking approach from traders.
“Liquidity is being held off-exchange—bridged, sidelined, or used in private markets—rather than actively deployed to purchase BTC or ETH,” they stated.
Similar concerns affect accumulation patterns, as data from derivatives platforms reveal a preference for “hedging and leverage strategies,” a typical response during sideways market conditions.
“Past trends indicate Bitcoin often tends to ‘lag, then leap,’” XWIN concluded.
“After equity all-time highs, BTC has historically surged by +12% within 30 days and +35% within 90 days. Although short-term challenges remain—QT, Treasury liquidity absorption, and impending options expiries—the structural landscape favors crypto once liquidity cycles converge.”
As reported by Cointelegraph, this Friday’s $22.6 billion options expiry is crucial and may influence future prices.
This article does not offer investment advice or recommendations. Each investment and trading decision involves risk, and readers are encouraged to conduct their own research.
