Stablecoin Surge Adds Volatility to Bitcoin Price
The Most Important Points in Brief
The increasing amount of stablecoins on the market significantly influences the Bitcoin price. While a growing stablecoin supply usually indicates higher purchasing power, a large portion of this liquidity is flowing into the derivatives market rather than the spot market. As a result, the risk of high-leverage positions increases, which could put short-term pressure on the Bitcoin price.
Leverage Trading Dominates Stablecoin Usage
Since November, the stablecoin supply has increased significantly. In particular, Tether (USDT) saw a rise of around 20 billion USD, coinciding with Bitcoin’s price surge to an all-time high of 109,000 USD.
However, data from CryptoQuant shows that this liquidity did not flow directly into Bitcoin investments but was primarily used for leveraged positions in derivatives. On January 22, open interest (OI) – an indicator for open positions in the derivatives market – reached its peak at 70 billion USD. Currently, it stands at 52 billion USD.
The closure of these positions put selling pressure on Bitcoin, making it difficult to reach the 90,000 USD mark again.
Weak Spot Demand Endangers Bitcoin’s Price Development
On November 6, U.S. election day, a clear trend emerged: While stablecoins flowed out of spot exchanges, 1.2 billion USDT simultaneously entered the derivatives market. This suggests that traders are increasingly relying on leveraged positions instead of buying Bitcoin directly.
After the FOMC (Federal Open Market Committee) meeting, which raised hopes for interest rate cuts, Bitcoin’s estimated leverage ratio (ELR) surged. Lower interest rates could further increase the attractiveness of leveraged positions.
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Since Bitcoin demand in the spot market remains weak, the risk of liquidations rises. If this trend continues, it could be difficult for Bitcoin to sustainably surpass the 90,000 USD mark.
Our Assessment
The increasing stablecoin supply alone is not a negative signal. What matters is where this liquidity flows. The current trend shows that a large portion is entering the derivatives market, creating high short-term volatility. If demand in the spot market does not recover, Bitcoin could remain under pressure. Investors should closely monitor stablecoin flows to identify potential risks early.
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