Delayed Stablecoin Supply Raises Doubts About BTC’s Bullish Recovery Ahead of U.S. Inflation Report

The delayed stablecoin supply has sparked concerns about Bitcoin’s (BTC) bullish recovery, highlighting potential downside risks ahead of a key U.S. inflation report.

The delayed stablecoin supply has stabilized with minimal changes, indicating reduced capital inflows, which could impact BTC’s price momentum.

Bitcoin recently rebounded from below $90,000, suggesting bullish sentiment. However, the delayed stablecoin supplyquestions the sustainability of this price recovery, especially if the U.S. inflation data, set for release on Wednesday, exceeds expectations.

Stablecoin Supply Stalls at $189 Billion – Delayed Stablecoin Supply

Data from Glassnode reveals that the combined supply of the top four stablecoins—USDT, USDC, BUSD, and DAI—has plateaued around $189 billion, with a 30-day net change of just 0.37%.

Stablecoins, pegged to fiat currencies like the U.S. dollar, often serve as a liquidity source for crypto investments and a protective asset during volatile markets. The delayed stablecoin supply suggests a lack of new capital entering the crypto market, dampening bullish momentum.

According to Glassnode, the lack of fresh liquidity is significant:

“The fact that the late-2024 rally required almost 2x the capital inflow for a smaller price gain underscores the speculative demand and liquidity-driven momentum that has since cooled.”

This delayed stablecoin supply contrasts sharply with the $27.3 billion inflow seen between November and December, which fueled BTC’s rise from $70,000 to over $108,000.

U.S. Inflation Data Could Shift Market Sentiment

The U.S. Consumer Price Index (CPI) data, scheduled for release on Wednesday at 13:30 UTC, is forecasted to reveal a 0.3% month-over-month rise for December, consistent with November’s figures.

However, if inflation figures exceed expectations, market sentiment could shift dramatically. Analysts expect a 2.9% year-over-year increase, with the core inflation rate projected at 3.3%. A higher-than-expected report could reinforce fears that the Federal Reserve will delay rate cuts, putting further pressure on BTC.

A more cautious Federal Reserve stance, combined with the delayed stablecoin supply, could limit market liquidity, making it difficult for Bitcoin to sustain its upward trajectory.

The delayed stablecoin supply also raises concerns when compared to historical inflow patterns.

November-December 2023: $27.3 billion in stablecoin inflows, driving BTC from $70,000 to $108,000.

Q1 2024: Only $14.68 billion in inflows, despite BTC surging nearly 70% to $70,000.

The sharp contrast between these figures emphasizes the significant role stablecoin supply plays in market liquidity and price momentum.

Crypto analysts have expressed concerns over the delayed stablecoin supply and its impact on BTC’s short-term performance.

James Butterfill, Head of Research at CoinShares, noted:

“Stablecoin flows are often a barometer of market confidence. This stagnation in supply indicates hesitation among investors, which could limit BTC’s upside potential in the coming weeks.”

Katie Stockton, Managing Partner at Fairlead Strategies, added:

“With inflation concerns mounting and stablecoin liquidity drying up, Bitcoin faces a challenging path for sustained bullish momentum.”

The Impact of Declining Liquidity – Delayed Stablecoin Supply

The delayed stablecoin supply not only dampens BTC’s bullish outlook but also raises broader concerns about crypto market liquidity.

Stablecoin inflows often act as “dry powder” for buying assets during bullish phases. The current stalled supply reduces this capital reserve, potentially leading to lower trading volume and higher volatility.

This liquidity squeeze could be further compounded by:

Regulatory Uncertainty: Ongoing scrutiny around stablecoins like USDT and USDC.

Market Sentiment Shifts: Rising inflation fears and Fed policy tightening.

Weakened Retail Participation: Lower buying pressure from retail investors.

The delayed stablecoin supply will be a critical factor as markets react to the U.S. inflation report. If data exceeds forecasts, Bitcoin’s recent gains could face renewed selling pressure, especially in a low-liquidity environment.

However, if inflation meets or falls below expectations, BTC could stabilize, but the delayed stablecoin supply may still limit its bullish momentum without fresh capital inflows.

The delayed stablecoin supply continues to signal reduced market liquidity, raising doubts about BTC’s sustained recovery. As the market anticipates the U.S. inflation data, investors should brace for heightened volatility.

Whether BTC can maintain its bullish course will largely depend on both inflation figures and whether the delayed stablecoin supply begins to show signs of renewed growth. Stay updated with the latest developments in the cryptocurrency industry through The BIT Gazette