The Impact of U.S. Monetary Policy on Bitcoin’s Price Stall

The stagnation of Bitcoin’s price since its peak in March has been attributed to the tight U.S. monetary policy, leading to a reduction in stablecoin supply. Analysts from CryptoQuant highlighted that the tightening monetary policy in the U.S. starting from March 2022 has played a crucial role in this scenario. The overall stablecoin supply started to decrease when the Federal Reserve began raising interest rates. Although the supply saw an increase in late 2023, the interest rates have remained consistently high at over 5% for more than a year.

Bitcoin’s performance has also been affected by the expectation of lower interest rates and fiscal policies that bring liquidity to the markets. It was noted that an increase in stablecoin liquidity and circulating supply through a more accommodative monetary policy in the U.S. is essential for Bitcoin to enter a bull market. Until then, Bitcoin may continue to trade sideways or experience corrections, indicating that investors should maintain a long-term perspective.

The stablecoin market capitalization has been steadily increasing over the past few months, reaching $161 billion, representing approximately 7% of the total crypto market. This is significantly lower than its peak in 2022. Tether remains the dominant player with a market share of nearly 70% and a supply of $112 billion. Circle follows with around 20% market share and a circulating supply of $32.5 billion. Maker’s DAI stands as the third-largest stablecoin with a market cap of $5 billion and a share slightly over 3%.

Circle CEO Jeremy Allaire has predicted that stablecoins could potentially account for 10% of “global economic money” within the next decade. This forecast indicates a promising outlook for stablecoins in the financial landscape.

The impact of U.S. monetary policy on Bitcoin’s price stall emphasizes the interconnectedness of the cryptocurrency market with broader economic factors. The dynamics of stablecoin supply, interest rates, and market liquidity play a significant role in shaping the performance of Bitcoin and other digital assets. As investors navigate through these fluctuations, maintaining a strategic and informed approach towards market trends becomes essential for long-term success in the cryptocurrency space.