Stablecoin Dominance Drops Bitcoin and Altcoins Poised to Rise

Stablecoins, particularly Tether [USDT] and USD Coin [USDC], currently hold a significant market capitalization, with their combined dominance standing at 7.19%. The trends in stablecoin and Bitcoin [BTC] dominance can provide insights into market sentiment and future price movements. The dominance of stablecoins and Bitcoin can be inversely related to crypto prices, with higher stablecoin dominance indicating a preference for holding stable assets over altcoins or Bitcoin. Conversely, a fall in stablecoin dominance suggests that investors are moving their capital into other assets, potentially driving prices higher and indicating a more bullish market.

On the 1-week chart, the combined dominance of Tether and USD Coin has been moving within a descending channel, which suggests that the dominance is likely to fall soon. This fall could lead to an uptrend for Bitcoin and potentially many altcoins. The descending channel formation has been respected since July 2023, making a breakout unlikely. A hike in USDT reserves on centralized exchanges implies heightened buying power, with a trend pointing higher over the past 18 months, especially in November 2024. USD Coin also saw growth in its exchange reserves, but not as constant as USDT, with reserves at $4.2 billion compared to USDT’s $42.1 billion. These volumes suggest that USDT remains the favored stablecoin for trading and liquidity purposes.

The weekly chart of BTC.D shows similarities between November-December 2024 and May 2019, with the 60% level serving as resistance and being flipped to support after a deviation beneath it. An uptick in BTC.D implies Bitcoin gaining more value than the altcoin market. However, capital rotation after strong BTC-centered gains could usher in an altseason, although recent price action has dampened this hope among market participants. The potential for an altseason remains, as the market dynamics could still shift in favor of altcoins following a period of Bitcoin dominance.