Bitcoin Price Rally In Jeopardy Due to Stablecoin Dominance: BTC Bulls Uncertain

The recent 10% upswing in Bitcoin price has changed crypto investors’ outlook from bearish to bullish. But this move could be in jeopardy due to stablecoin dominance.

Recent 10% upswing in Bitcoin price has shifted crypto investors’ outlook from bearish to bullish. But this move could be in jeopardy due to stablecoin dominance. BTC investors need to tread carefully as the uptrend could reverse.

Bitcoin price saw a 10% upswing in the past week. This move shifted the outlook from bearish to cautiously optimistic. However, a closer look at the market reveals that the uptrend could be short-lived due to a key metric.

The upswing that kickstarted on September 6 propelled Bitcoin price up by 10% from $52,500, reaching highs of $58,129 on September 12. This move flipped the crypto market sentiment to cautiously optimistic, confirmed by Alternative’s Fear & Greed Index’s (FGI) uptick from 22 on September 6 to 31 as of September 12.

While the outlook is bullish no doubt, investors need to be cautious as the overall trend of BTC is still bearish. A spike in stablecoin dominance shows that the market capitalization of stablecoins is rising relative to other cryptocurrencies. This development is an indication of risk-off behavior from investors. If this metric does not trend lower in the coming weeks, there is a good chance the uptrend could be undone.

Stablecoin dominance is the relative measure of stablecoin market capitalization compared to the total cryptocurrency market capitalization. Data from Alphractal shows that the decline in stablecoin dominance, between June 2023 and early 2024, coincided with the bull run in Bitcoin price.

Now that the metric shows an uptick, it could suggest that the downtrend is still not over. A spike in stablecoin dominance shows that the market capitalization of stablecoins is rising relative to other cryptocurrencies. This development is an indication of risk-off behavior from investors.

The short-term outlook for BTC price is bullish after the recent rally. However, the six-month downtrend consolidation shows lower highs and lower lows. Once BTC produces a higher high above $65,000, there is a much higher chance of restarting the ongoing bull run.

Unless BTC overcomes the $63,000 to $65,000 resistance zone, the short-term bullish outlook is at most, uncertain. The Relative Strength Index (RSI) and the Awesome Oscillator (AO) are showing a short-term shift in the momentum favoring bulls.

However, unless there is stabilization above their respective mean levels of 50 & 0, the recovery rally thesis is risky. Over the past six months, all short-term rallies have resulted in a quick sell-off.

So, unless BTC sees a sustained spike in buying pressure that prevents a sell-off, it is unlikely the crypto market will flip bullish. Therefore, the Bitcoin price prediction hints at a cautiously optimistic outlook with bias leaning toward the downside.

A breakdown of the $54,000 level on the daily time frame will invalidate the short-term bullish thesis. This development could see BTC trickle down to the $52,271 to $50,710 support zone.

1. Stablecoin dominance is a measure of the relative market capitalization of stablecoins compared to all cryptocurrencies. It indicates the level of risk-aversion among crypto investors.

2. Higher stablecoin dominance, typically during a bear market, indicates that investors are shifting toward stablecoins, suggesting a bearish trend.

3. For a sustained bullish outlook, Bitcoin price needs to overcome the $63,000 to $65,000 resistance zone on the daily time frame

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