Bitcoin and other cryptocurrencies have been struggling to keep up with the performance of traditional assets like gold and stocks, which have been reaching new all-time highs. According to a recent study by Cryptoquant, a leading on-chain analytics platform, there are four key reasons why Bitcoin and other cryptocurrencies are lagging behind. These reasons include Fed rate cuts, stablecoin reserves, risk-averse traders, and historical patterns.
The study suggests that when the Federal Reserve cuts interest rates, institutional capital flows into high-liquidity systems like stocks and gold first, before eventually making its way to cryptocurrencies. This means that crypto assets, especially older coins like Bitcoin, are at the end of the liquidity pipeline and only benefit when risk appetite expands. As a result, Bitcoin and other cryptocurrencies tend to follow the performance of traditional assets with a delay, rather than leading the charge.
One of the key factors contributing to this delay is the stablecoin market. The total supply of stablecoins has reached a record high of $308 billion, with more stablecoins leaving exchanges than entering. This indicates a risk-off or profit-taking mentality among traders, which reduces the liquidity available for cryptocurrencies. As Cryptoquant notes, “the liquidity is parked outside of exchanges, unable to be used or actively used in private markets to buy BTC or ETH.”
Another factor influencing the accumulation of cryptocurrencies is the preference for “safety and leveraged strategies” among traders. This is a classic reaction to sideways market trends, where traders seek to minimize risk and maximize returns through leveraged positions. However, this approach can also limit the potential for upside gains in cryptocurrencies.
Despite these challenges, the study suggests that Bitcoin and other cryptocurrencies are due for a rebound. Historically, Bitcoin has tended to “delay, then jump” after traditional assets have reached new highs. According to Cryptoquant, “BTC has increased historically by +12% in 30 days and in 90 days +35% after equity ATHs.” While short-term headwinds remain, the structural fundamentals favor cryptocurrencies as soon as liquidity cycles catch up.
In conclusion, the performance of Bitcoin and other cryptocurrencies is closely tied to the trends in traditional assets like gold and stocks. While there may be a delay in the uptake of cryptocurrencies, the historical patterns suggest that a rebound is due. As the study notes, “the story indicates that Bitcoin tends to ‘delay, then jump’ after equity ATHs.” For more information, read the full article on CoinTelegraph.
