Bitcoin’s price has hit a plateau since its peak in March, with analysts attributing this stagnation to the tightening U.S. monetary policy. According to CryptoQuant analysts, the Federal Reserve’s decision to raise interest rates in early 2022 led to a decrease in stablecoin supply, impacting Bitcoin’s ability to rally further. Despite a slight increase in stablecoin supply towards late 2023, interest rates have remained high, impeding potential growth in the cryptocurrency market.
Need for More Accommodative Monetary Policy
To propel Bitcoin into a bullish trend, analysts emphasize the importance of increasing stablecoin liquidity and circulating supply through a more accommodative monetary policy in the U.S. The expectation of lower interest rates and increased market liquidity due to favorable fiscal policies are seen as key factors that could help Bitcoin break free from its current sideways movement or corrective phase.
Lower interest rates generally make cash investments less appealing, driving investors towards higher-risk assets such as cryptocurrencies and technology stocks. The Federal Reserve’s plan to potentially lower interest rates in the coming months, as long as economic data remains favorable, could provide the necessary push for Bitcoin to resume its upward trajectory.
The stablecoin market has shown significant growth in recent months, with its total market capitalization reaching $161 billion, constituting roughly 7% of the overall cryptocurrency market. Tether remains the dominant player in the stablecoin space, holding a market share of nearly 70% and reporting a record supply of $112 billion. Circle, the second-largest stablecoin issuer, commands a market share of approximately 20% with a circulating supply of $32.5 billion, while Maker’s DAI ranks third with a $5 billion market cap.
Future Outlook for Stablecoins
Circle CEO Jeremy Allaire has predicted that stablecoins could represent 10% of “global economic money” within the next decade. This projection underscores the growing influence and potential of stablecoins in the broader financial landscape, hinting at a future where digital currencies play a more prominent role in mainstream economic transactions.
