Key Points
- Bitcoin shows signs of recovery but faces challenges with looming US inflation data report.
- Stagnant stablecoin supply adds to the uncertainty of Bitcoin’s sustained gains.
Bitcoin investors and holders started the week on a positive note, leaving behind the struggles of the previous week. The cryptocurrency began demonstrating encouraging signs from Monday and has since made considerable gains, helping it rise from below $90,000.
Uncertainty Surrounding Inflation Data
Despite these positive indications, there are still concerns in the market, particularly regarding whether Bitcoin can maintain its recent gains or possibly increase them. These concerns are heightened as the market anticipates the release of US inflation data.
Any negative inflation data could pose a challenge for Bitcoin and other cryptocurrencies. The inflation report, due at 13:30 UTC, will reveal the changes in the cost of living for December. Analysts predict a month-on-month increase of 0.3%, similar to November’s figures, and a year-on-year rise to 2.9%, slightly higher than November’s 2.75%. Core inflation, excluding food and energy costs, is also expected to rise 0.2% month-on-month and 3.3% year-on-year.
Stagnant Stablecoin Supply Adds Pressure
In addition to the US inflation data, the supply of major stablecoins is another factor casting doubt on Bitcoin’s sustained gains. Data from Glassnode suggests that stablecoin supply may have stalled, indicating a lack of new capital inflows into the market.
The supply of the top four stablecoins by market value has remained relatively unchanged for over a month, with their combined supply currently standing at around $189 billion. This represents a mere 0.37% increase over the past month.
This negligible change in stablecoin liquidity contrasts sharply with the stablecoin market in late 2024, as noted in a Glassnode Telegram note. Between November and December of that year, over $27.3 billion of fresh capital was injected into the market, supporting Bitcoin’s rise from $70,000 to over $108,000.
In the first quarter of 2024, inflows of approximately $14.68 billion helped Bitcoin gain 70%, reaching the $70,000 mark. The future for Bitcoin and the broader crypto market remains uncertain. However, a favorable inflation report and fresh capital injection into the stablecoin market could potentially improve Bitcoin’s prospects for further gains.
