Stablecoins May Not Be Enough to Drive Bitcoin's Bull Market, CryptoQuant Founder Says

Stablecoins play a vital role during Bitcoin's bull and bear markets. They are the medium through which liquidity flows into BTC and they also provide a buffer for holding value during bearish times.

Stablecoins play a crucial role during Bitcoin’s bull and bear markets. They serve as the medium through which liquidity flows into BTC and also provide a buffer for holding value during bearish times. However, some believe that stablecoin liquidity may be holding back Bitcoin.

According to CryptoQuant founder Ki Young Ju, in a recent analysis, stablecoins are not capable of driving bullish momentum. This statement assumes the most bullish scenario, accounting for both Bitcoin and stablecoin reserves.

“Over the past two weeks, we’ve observed significant ETF inflows, led by BlackRock’s IBIT.

If spot ETF inflows might slow down at some point, the BTC/USD buy-side pressure from brokerage firms like Coinbase Prime might weaken, potentially leading the market back into stagnation.…”

Ju’s analysis shows that Bitcoin reserves outpaced stablecoin reserves by more than 6-fold. This indicates that the current stablecoin reserves may not be sufficient to match peak Bitcoin demand.

At the time of writing, Bitcoin had a market cap of $1.38 trillion, while the collective stablecoin market cap stood at $172.887 billion.

It’s noteworthy that the latter has grown from as low as $123.74 billion in September 2024 – its lowest level in the last 3 years.

The analysis also examined the role of ETFs in Bitcoin’s price action. It noted that a cooling down in Spot ETFs demand over the last 2 weeks was followed by weak demand.

The analysis also considered the possibility that Bitcoin’s price action risked stagnation if Spot EFT demand slows down to extreme lows.

This observation aligns with the latest price action and ETF flows. For instance, Bitcoin ETFs recently experienced a slowdown in demand on the last day of October after experiencing a week of positive flows.

The latest ETF data showed that Bitcoin ETFs concluded the week with net outflows. For example, ETFs recorded $54.9 million in outflows on Friday. Meanwhile, BTC has been struggling to recover back above $70,000 – confirming a slowdown in demand.

However, Bitcoin ETFs are still up by 62% from their approval date earlier this year. Here’s a look at how the ETF flows have performed so far –

At the time of writing, Bitcoin ETFs held over $24.4 billion. This impressive growth is a sign of the growing demand from the institutional class.

The latest outflows are likely connected to the uncertainty around the election period. It will be interesting to see how things play out after the elections.

Moreover, institutional investors are responding to the latest news on the resurgence of global liquidity, which bodes well for crypto holders. This is because lower interest rates have been paving the way for a risk-on sentiment.