The Missing Ingredient in the Crypto Market
Despite some bullish developments, the digital asset market still lacks one key ingredient that’s critical to fueling a sustained price rally, according to the analytics firm CryptoQuant. Demand for Bitcoin (BTC) and Ethereum (ETH) is on the rise, but stablecoin liquidity needs to recover for a sustained rally.
Increased Demand for Bitcoin and Ethereum
- CryptoQuant notes that demand growth for Bitcoin’s permanent holders added 70,000 BTC in the last 30 days.
- Large investors are showing a 4.4% monthly increase in demand, with $1 billion daily injections into Bitcoin, reminiscent of pre-rally activity in 2020.
- Ethereum’s demand has also surged post-May 20th, driven by spot ETH ETF approvals in the USA.
- Daily purchases of Ethereum by permanent holders rose to 40,000 ETH, while large investors now hold 16 million ETH.
Stablecoin Liquidity and Market Growth
CryptoQuant highlights the connection between stablecoin liquidity and price rallies. The market capitalization of Tether’s USDT, a key proxy for fresh liquidity in crypto markets, is decelerating and has slowed to its lowest pace since February 11. Typically, price rallies coincide with an uptick in stablecoin liquidity growth.
Bitcoin and Ethereum Performance
- Bitcoin is currently trading at $70,812, with a nearly 4% increase in the past seven days.
- Ethereum is trading at $3,809 and has seen a 1.5% increase in the past week.
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Hot Take: The Way Forward
The crypto market shows promise with increasing demand for Bitcoin and Ethereum. However, stablecoin liquidity remains a critical factor in sustaining price rallies. Investors should monitor these developments closely to make informed decisions about their portfolios.
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