Coinworld News Report:
Author: Chandler, ForesightNews
On October 24th, market data showed that the price of Bitcoin fell below $66,000. Starting from October 21st, the upward momentum of Bitcoin has shown signs of weakness, falling from a high of $69,500 and reaching a low of $65,260. Ethereum followed a similar trend, sliding from a high of $2,770 to a low of $2,440. According to data from Coinglass, the market saw liquidations worth $279 million in the past 24 hours, with long liquidations reaching as high as $202 million.
Has the market reached another phase of a market cycle? Perhaps we can find some clues from on-chain data.
Bitcoin Dominance Index (BTC.D) represents the percentage of Bitcoin’s market value in the cryptocurrency market. Since around September 2022, BTC’s dominance has been on an overall upward trend. According to Coinmarketcap data, BTC’s dominance has recently approached 58%, with a year-to-date increase of over 8%, reaching its highest point since April 2021.
Historical data shows that the early stage of a bull market cycle is usually accompanied by an increase in Bitcoin dominance, while Bitcoin’s dominance tends to decrease when the market enters the “Altcoin Season” of alternative cryptocurrencies. Additionally, when Bitcoin’s dominance reaches a high point, the market often enters a consolidation or correction phase. In theory, this is a manifestation of the market’s liquidity and investment sentiment reaching a critical point. It is a natural result of profit-taking when Bitcoin attracts a large influx of funds and its price reaches higher levels.
The flow of funds into Bitcoin spot ETFs becomes crucial
It is worth noting that the recent increase in Bitcoin dominance has been mainly driven by the influx of funds into Bitcoin spot ETFs, especially from institutional investors. According to data disclosed by Ki Young Ju, CEO of CryptoQuant, institutional holdings in US Bitcoin spot ETFs account for about 20%. Asset management companies hold approximately 193,000 Bitcoins. Thanks to spot ETFs, 1,179 institutions have invested in Bitcoin this year.
Based on the data, from October 14th to October 21st, Bitcoin spot ETFs saw continuous net inflows for 7 days, especially with BlackRock’s ETF IBIT receiving net inflows of over $1.5 billion, increasing its BTC holdings to 391,484 coins (worth approximately $26.45 billion). Bitcoin’s price also rose from $62,300 to over $69,000.
However, with the first net outflow of Bitcoin spot ETFs in 7 days on October 22nd, with a total net outflow of $79.09 million, the trend of Bitcoin’s price began to exhibit stagnant oscillations accompanied by a decline. This phenomenon can be interpreted as the market failing to break through important technical support levels, resulting in a decrease in investor confidence in the short-term outlook. When institutional funds start to decrease or flow out, price corrections occur. If Bitcoin fails to effectively break through, its price trend may face further consolidation and oscillations.
From another perspective, the market’s reaction indicates that the rise of Bitcoin has attracted a significant amount of liquidity, which is particularly evident in the current market stage. Meanwhile, Bitcoin gradually absorbs the liquidity of other alternative cryptocurrencies during its oscillation, further creating a noticeable “vampire effect.” During Bitcoin’s rise, other crypto assets often do not experience a simultaneous increase, causing market liquidity to further tilt towards Bitcoin. If Bitcoin fails to break through key resistance levels, the market may experience a short-term correction, further draining liquidity from the altcoin market and intensifying price volatility. Typically, after Bitcoin reaches a new high, some liquidity may overflow into the altcoin market, leading to a larger-scale price increase.
USDT market cap reaches a historic high, USDT.D tests support
Stablecoin market cap has increased its share by grabbing Ethereum’s share, excluding other altcoins. Its share of BTC, ETH, and stablecoin market cap has increased from 7% in 2022 to 10% in 2024. According to DefiLlama data, the total market cap of stablecoins is currently $172.778 billion, reaching a new high since May 2022.
Among them, USDT’s market cap hit a new high of $120 billion, accounting for 69.49% of the total stablecoin market cap. This has been the main driving force behind stablecoins taking market share from ETH in the past six months.
The rise of USDT.D, however, is not a favorable sign for the market. USDT.D can serve as a barometer of market sentiment, effectively predicting the price tops and bottoms of Bitcoin during different cycles.
As can be seen from the chart below, during this year’s market trend, whenever USDT.D approaches or retests its long-term rising support line, Bitcoin often experiences local price peaks. This is because investors tend to transfer funds to stablecoins like USDT to avoid risk during market volatility. Therefore, the rise of USDT.D usually indicates the withdrawal of market funds and represents the recent price peaks of Bitcoin.
Weakening demand
From a medium-to-long-term perspective, the absolute realized profits and losses in the Bitcoin market have shown a significant downward trend. Since reaching a historical high of $73,000 in March 2024, the influx of new capital into the market has significantly slowed down. According to data provided by Glassnode, the daily inflow of capital into the market is currently around $730 million. Although this number is still significant, it is a significant decrease compared to the peak of $2.97 billion in March.
This indicates a significant weakening of demand in the market. While capital is still flowing into the market, the scale is not enough to drive a long-term stable rise or fall in Bitcoin prices. Instead, it is more likely to cause drastic fluctuations in response to relatively small capital movements. This lack of liquidity may result in continued significant price volatility in the short term, while the market as a whole lacks a clear direction, leading to a stronger wait-and-see sentiment among large funds.
Overall, Bitcoin is currently in a market situation characterized by high volatility and uncertainty. The price trend in the past six months has been more like constant fluctuations within the existing range. Without significant inflows or outflows of large-scale capital, it may be difficult for Bitcoin’s price to break the current oscillation pattern.
This market phenomenon is closely related to the fluctuation of market participants’ sentiment. The wait-and-see sentiment among large funds is strong, and many institutional investors choose to wait for more clear market signals, such as further clarity in macroeconomic policies or adjustments in future monetary policies by the Federal Reserve, as well as the outcome of the upcoming US presidential election. In the current stage, the market sentiment is fragile, and any sudden changes at the macro level can become catalysts for market volatility.
