The market is yet to reach the extreme greed phase that typically indicates a market peak, similar to when Bitcoin [BTC] reached its all-time high of $73k back in March.
Nevertheless, there has been a noticeable increase in market liquidity over the past week, largely due to Bitcoin surpassing key psychological thresholds. A significant factor driving this liquidity is the declining dominance of Tether [USDT], suggesting a potential shift of capital from stablecoins to Bitcoin.
This shift was confirmed by a bearish MACD crossover on the same day.
Essentially, a substantial amount of liquidity has flowed into BTC, as investors saw $62k as a new floor and took advantage of the buying opportunity. Additionally, a significant milestone highlighted the increasing importance of USDT and USDC, further affecting Bitcoin’s price movements.
Presently, USDT and USDC represent nearly half of the total trading volume across major cryptocurrencies, reinforcing their position as safe havens as Bitcoin approaches a market peak.
As of now, USDT appears to be approaching a crucial support level – a level it has tested twice since July. On each occasion, Bitcoin encountered strong resistance around $65k, leading to notable pullbacks.
With BTC priced at $68,346, an increase in USDT dominance could potentially prompt a market correction, indicating investor anxiety as they secure profits before the rally subsides.
Monitoring USDT Dominance is Vital
In addition to the bearish MACD crossover, various key indicators, such as a declining RSI, indicate that USDT dominance may continue to decrease, possibly returning to early July levels when Bitcoin was hovering around $68k.
If this trend persists, Bitcoin could experience a bullish weekend, supported by positive sentiment as substantial liquidity flows from USDT into BTC.
However, caution is advised. While USDT outflows have been gaining momentum, they could instigate a short-term market correction. Nonetheless, an outright pullback is not guaranteed unless this pattern continues over the next few days.
Therefore, closely monitoring the USDT dominance chart is crucial. Any slight deviation from the current downtrend could signify the conclusion of the bullish cycle.
Reflecting on past trends, such a shift could potentially push BTC below $62k – the established recent low.