• Bitcoin price has stagnated since its March peak due to tight US monetary policies, according to CryptoQuant analysts.

  • These analysts state that the interest rate increases initiated by the Federal Reserve in early 2022 narrowed the supply of stablecoins.

  • “The main reason for Bitcoin's stagnant rally is the ongoing tight US monetary policy since March 2022,” the CryptoQuant report observed on July 3.

  • The Impact of US Monetary Policy on Bitcoin

    Since early 2022, the US Federal Reserve has continuously increased interest rates, leading to a decrease in the supply of stablecoins. According to CryptoQuant's report, this tight monetary policy has been the main factor in Bitcoin's failure to reach new highs after March 2022.

    Stablecoin Liquidity Needed for Bitcoin Rallies

    The report emphasizes that increasing stablecoin liquidity and circulating supply is vital for Bitcoin to experience a sustainable rally. The Federal Reserve's high interest rates above 5% have hindered this growth, despite a brief stablecoin supply surge in late 2023.

  • Analysts argue that a more accommodative fiscal policy, including possible interest rate cuts expected in September, could revive the crypto market in the US. Low interest rates reduce the attractiveness of cash investments, which makes high-risk assets such as cryptocurrencies more attractive.

    The capitalization of the stablecoin market has gradually increased in recent months and is currently worth $161 billion, accounting for approximately 7% of the total crypto market. However, this figure is still less than half of its peak in 2022. Tether (USDT) continues to dominate the market with 70% market share and its supply is at an all-time high of $112 billion.

  • Market Dynamics and Future Expectations

    The second largest stablecoin, Circle's USDC, has a market cap of around 20% with a circulating supply of $32.5 billion, followed by Maker's DAI with a market cap of $5 billion at 3%. Circle CEO Jeremy Allaire predicts that stablecoins could make up 10% of “global economic money” within the next decade.

    Conclusion

    In summary, Bitcoin's future rallies appear to depend on an increase in stablecoin liquidity, which will in turn depend on more favorable US monetary policies. With the Federal Reserve expected to cut interest rates this September, the crypto market may see higher activity. Investors are advised to examine the evolution of these dynamics from a long-term perspective.

  • 📈📉 #Bitcoin $BTC