The recent surge of 10% in Bitcoin’s value has shifted the mindset of crypto investors from pessimistic to optimistic. However, this positive momentum may be at risk due to the dominance of stablecoins in the market. Consequently, investors in BTC should proceed cautiously as the upward trend could potentially reverse.
Why is Bitcoin’s Price Rally in Danger?
The upswing that started on September 6 drove Bitcoin’s price up by 10%, moving from $52,500 to $58,129. This shift in market sentiment to cautiously bullish was corroborated by the Fear & Greed Index increasing from 22 on September 6 to 31 by September 12.
Despite the current bullish outlook, stablecoin dominance has been steadily rising since Bitcoin’s all-time high in March 2024. While the sentiment now leans towards bullishness, investors are advised to be vigilant as the overall trend for BTC remains bearish.
Stablecoin dominance measures the relative market capitalization of stablecoins against the total cryptocurrency market capitalization.
Data from Alphractal indicates that the decline in stablecoin dominance coincided with Bitcoin’s bullish phase between June 2023 and early 2024. The recent uptick in this metric might suggest that the bearish trend has not yet concluded.
A surge in stablecoin dominance signifies an increase in the market capitalization of stablecoins compared to other cryptocurrencies, reflecting a risk-averse attitude among investors. If this metric does not show a decline in the coming weeks, it could potentially unravel the upward trend.
Bitcoin Price Analysis: Uncertain Bullish Sentiment
The short-term outlook for BTC price appears bullish following the recent rally. However, a six-month downtrend consolidation pattern demonstrates lower lows and lower highs. Breaking above $65,000 will significantly increase the chances of resuming the ongoing bullish trend.
Without surpassing the resistance zone of $63,000 to $65,000, the short-term bullish sentiment remains uncertain at best.
While the Relative Strength Index (RSI) and Awesome Oscillator (AO) hint at a shift favoring bulls in the short term, sustaining levels above 50 and 0, respectively, is crucial for the recovery rally thesis.
Historically, short-term price surges in Bitcoin have been accompanied by swift sell-offs. Sustained buying pressure is necessary to prevent a sell-off and potentially flip the crypto market sentiment to bullish.
Hence, the Bitcoin price prediction suggests a cautiously optimistic outlook with a slight inclination towards the downside.
A break below the $54,000 level on the daily timeframe could invalidate the short-term bullish thesis, possibly leading Bitcoin to the support zone ranging from $52,271 to $50,710.
Reference: Here’s Why Stablecoins Threaten Bitcoin Price Rally to $60K – CoinGape.