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- Bitcoin has regained some ground and is trading over $27,000 after a recent plunge.
- The stablecoin supply ratio has dropped by 11% over the past 11 days, suggesting an increase in buying power for stablecoins.
Bitcoin Rebounds at $27K: Encouraging Signs
After a week of significant price drops, Bitcoin is showing signs of stabilization. The largest cryptocurrency by market capitalization is currently trading at around $27,165, up 1.1% in the past 24 hours. While Bitcoin is still down more than 10% since its recent decline on May 5, the market has been impacted by profit-taking, low liquidity, and uncertainties in both the cryptocurrency industry and the macroeconomy.
Ryan Rasmussen, an analyst for crypto fund manager Bitwise, explained that financial markets are influenced by risk and liquidity. During times of heightened risk aversion, such as the present, selling pressure increases due to reduced liquidity. However, Rasmussen expressed optimism, stating that more liquidity is expected to flow into the crypto market.
Ether, the second-largest cryptocurrency by market value, is currently trading around $1,800, with a slight decrease compared to early Saturday. Other major cryptocurrencies, such as Litecoin, have entered the green territory, signaling positive momentum as the Asia trading week begins. The CoinDesk Market Index, which measures the overall performance of the crypto market, has increased by 0.8%.
Correlation Between Crypto and Traditional Assets
The correlation between cryptocurrencies and traditional asset markets has been declining recently. While the tech-heavy Nasdaq Composite experienced a slight increase over the past five days, the S&P 500 and Dow Jones Industrial Average (DJIA) fell by 0.2% and 1.1%, respectively. Rasmussen noted this declining correlation and highlighted that any mistrust in traditional financial systems tends to benefit the crypto market.
Joe DiPasquale, CEO of crypto fund manager BitBull Capital, believes that the current macroeconomic situation globally is creating a conducive environment for crypto assets to thrive. DiPasquale expects Bitcoin’s price to stabilize between $25,000 and $27,000 before potentially experiencing another major rally toward $30,000.
Stablecoin Supply Ratio and Bitcoin’s Buying Pressure
The Stablecoin Supply Ratio (SSR), which measures the ratio of Bitcoin’s market capitalization to the market cap of stablecoins, has seen an 11% decline over the past 11 days. This indicates a potential increase in buying pressure for Bitcoin. A higher SSR indicates weakening buying power, while lower values suggest increasing buying power.
The recent drop in SSR follows a significant 52% increase between March and May 5. This pivot suggests that additional cash or liquid reserves have entered the market, which could potentially drive Bitcoin’s prices higher.
In conclusion, Bitcoin has shown signs of recovery after a recent price drop, with the cryptocurrency trading above $27,000. The declining correlation between cryptocurrencies and traditional assets is seen as a positive indicator for the crypto market. Additionally, the drop in the Stablecoin Supply Ratio suggests a potential increase in buying power for Bitcoin, which may contribute to higher prices in the future.