Stablecoin Growth Stagnates Ahead of U.S. Inflation Data
The growth of the three leading stablecoins, USDT, USDC, and DAI, has hit a roadblock following the bitcoin halving. However, there may be a revival in market inflows if the U.S. CPI print on Wednesday indicates softer inflation.
China’s plans to increase fiscal support for its economy could also have positive implications for risk assets.
The expansion of stablecoins, which played a crucial role in the first quarter’s crypto bull market, has come to a halt since the bitcoin halving. The combined market value of the top three stablecoins has remained stable at around $149 billion to $150 billion for the past three weeks.
This consolidation after an uptrend is seen as bearish for the market, according to 10x Research. Stablecoin inflows have seen almost zero growth since the halving, indicating reduced bitcoin futures leverage and a lack of confidence in a post-halving rally.
Market analyst Markus Thielen suggests that bitcoin could correct to $55,000 or lower in the coming weeks, while ether could drop to $2,500.
Stablecoins have been widely used by traders to fund cryptocurrency purchases and derivatives trading. Therefore, the expansion or contraction of their supplies is seen as an indication of market inflows, which can impact market sentiment.
Coinciding with the stall in stablecoin expansion is a noticeable slowdown in inflows into U.S.-listed spot ETFs, which has had a dampening effect on the bitcoin bull run.
The release of the U.S. consumer price index (CPI) data on Wednesday is anticipated to have an impact on bitcoin’s price. If the CPI shows softer-than-expected inflation, there is a possibility of bitcoin surpassing $65,000.
A potential slowdown in inflation would raise hopes for Fed rate cuts, which could lead to increased inflows into risk assets, including cryptocurrencies.
Furthermore, China’s plan to inject liquidity into its system through a bond issuance is seen as a positive development. The injection of liquidity could stimulate the economy and potentially contribute to a bounce in bitcoin’s price.
Overall, the expansion of stablecoins and the performance of bitcoin are closely intertwined with macroeconomic factors such as inflation data and fiscal policies. Traders and investors are eagerly waiting for these indicators to determine the future direction of the market.