The Risk of a Stablecoin Liquidity Crisis – What Holders Should Know!
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- Are stablecoin reserves obstructing capital flows into Bitcoin?
- The rise of Bitcoin ETFs has been significant lately and may have impacted cryptocurrency prices.
Stablecoins are essential during both bullish and bearish phases of Bitcoin. They facilitate liquidity into BTC and act as a retaining buffer in downtrends. But, can stablecoin liquidity be a limiting factor for Bitcoin?
CryptoQuant founder Ki Young Ju suggested in an analysis that stablecoins might not be inducing bullish trends. This assertion took the most optimistic viewpoint while examining reserves of both Bitcoin and stablecoins. He remarked:
The investment by BlackRock IBIT has attracted notable inflows into ETFs recently.
If there’s a reduction in inflows into spot ETFs, then BTC/USD exchanges at brokerage platforms like Coinbase Prime may decrease too, potentially causing market stagnation….”
The research indicates that Bitcoin reserves surpass those of stablecoins by over six times. Therefore, current levels of stablecoin reserve might fall short during peak periods for Bitcoin demand.
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The market capitalization for Bitcoin was recorded at $1.38 trillion when this was written, while stablecoins held a total market cap of $172.887 billion.
This figure represents an increase from just $123.74 million in September 2024—the lowest value observed over three years.
Source: DeFiLlama.
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