Have investors started to become more conservative as the New Year unfolds? The supply of USD Coin [USDC] has spiked to $2 billion – marking its highest level in 707 days, all while the global crypto market cap experiences a 3.49% decline.
Historical data seems to suggest a potential pullback, although given the current market volatility, could we be on the verge of a significant crash instead?
Amid a Flight to Safety Towards USDC…
Following the recent presidential inauguration and the SEC’s approval of its initial crypto regulation, Bitcoin continues to linger 6.18% below its all-time high of $109K.
With this week’s market volatility, it is evident that investors are split – some are scaling back while others are holding onto their positions, resulting in a fierce tug-of-war involving BTC.
The encouraging aspect? BTC is maintaining levels above $100K, a price point that has previously triggered market rebounds. Over the last fortnight, BTC has dipped to this level on three occasions, each time prompting a rise in outflows.
It appears that some investors view this as an opportunity to leverage the dip.
Nonetheless, Bitcoin is only 3.54% higher than its recent weekly gains that pushed it beyond $109K. Should these gains erode, BTC might retrace to $98.4K. Moreover, the surge in USDC supply to a two-year high adds to the sense of caution prevailing in the market.
In just three days, USDC held across multiple exchanges plummeted by 17.21%, with Binance witnessing an 18% downturn. The sudden escalation in USDC supply to $2 billion from a mere $303K the day prior is undoubtedly a deliberate move by risk-averse investors.
As more investors pivot towards USDC or opt to cash out after realizing gains, the responsibility to absorb this liquidity now rests upon institutional entities.
MicroStrategy is actively participating in this process, having recently completed two acquisitions totaling 3,600 BTC solely in this month.
But the trend doesn’t stop there. BlackRock has just executed its most substantial Bitcoin acquisition of the year – purchasing $600 million worth of BTC. Could this mark the beginning of additional institutional investments that may contribute to market stability?
Whose Stability Will Garner Investor Preference?
Despite the price fluctuations in Bitcoin, Exchange-Traded Funds (ETFs) are observing constant inflows, providing vital institutional backing that has helped sustain BTC above the $100K threshold.
Conversely, the waning greed sentiment reflects a diminishing risk appetite, with investors shifting towards stablecoins such as USDC rather than Bitcoin. The ongoing discourse on Bitcoin’s perception as a ‘safe haven’ is escalating.
For instance, a significant $818 million worth of Tether USD (ERC20) coins exited exchanges just before Trump’s inauguration ceremony – marking the most substantial outflow witnessed in a year.
With Trump’s unconventional policies making waves in the news, it is understandable why investors are adopting a cautious stance.
Now, with uncertainty looming, the spotlight revolves around which asset class will assert dominance – stablecoins or Bitcoin. At present, stablecoins appear to hold a slight advantage, yet the battle for market supremacy is far from reaching a conclusion.