- Stablecoin supply rose 17% in the fourth quarter, with more investors jumping into Bitcoin despite the high risk
- BTC rose by more than 50% as a result. Is another rally on the charts?
The supply of stable coins and the price of Bitcoin are closely linked. When the stablecoins flow, Bitcoin often follows. Take for example the ‘Trump Pump’ in the fourth quarter of last year – Stablecoin supply rose 16.9% to $188.82 billion, and Bitcoin [BTC] rose from $67.8k to $106.1k. It was a textbook example of liquidity driving momentum.
But now the tides are turning. Liquidity inflows are slowing, signaling that investors are starting to hesitate. With a Trump Pump just days away, is crypto’s “high-risk, high-reward” appeal starting to lose its appeal?
The market is shifting towards caution
Bitcoin’s impressive recovery from $91,000 to $97,000 (at the time of writing) – a jump of 6.6% in just a week – shows that traders are bracing for the next big rally. And it’s no coincidence that Tether USD (ERC20) stablecoins saw $311.5 million in inflows during the same period.
This supports AMBCrypto’s theory: when liquidity rises, investors don’t hesitate. They are doubling down and adding to their portfolios.
However, this is just the beginning. It’s still nothing compared to last year’s Election Day, when a massive $2.15 billion worth of stablecoins flooded the market, marking the highest inflows of the year. The result? BTC rose 8.24% in one day, breaking the $70,000 mark for the first time in eight months.
Source: CryptoQuant
And it didn’t stop there. In the two months following the Trump pump, $27.35 billion in stablecoins flooded the exchanges, fueling BTC’s 56.5% rise to $106.5k. The fourth quarter really shattered the stablecoin’s “safe haven” image.
However, things have changed since then. Two clashes with the Fed, high inflation and increasing selling pressure have taken their toll. Open Interest (OI) has fallen from $68 billion to $61 billion, and stablecoin market cap has seen only a modest +0.56% change in the past 30 days.
And yet there is a silver lining. Although liquidity is more limited, this could lead to greater market stability. Combined with the decline in Open Interest (OI), this suggested that investors are becoming more cautious and less speculative about the future of BTC. With a lot at stake, this is a sign that the market is maturing.
Will Bitcoin Surpass Stablecoins?
Mathematically, a 56.5% surge like the Trump pump could push Bitcoin past $140,000 in the first quarter, with $90,000 acting as a solid support level. Even more promising, over the past three days, stablecoin net flows have turned positive, sparking a rally that is turning the market green again.
But let’s not get ahead of ourselves: a 50% rally could still be too ambitious. With 88% of Bitcoin’s supply in the hands of retailers, their next steps could be key to moving BTC closer to its first-quarter target. So the real game changer? An influx of stablecoins that exceeds the billion mark, a far cry from the current 130 million.
Source: IntoTheBlock
Read Bitcoin’s [BTC] Price forecast 2025-26
A near-term breakout of $100,000 seems likely, but the question remains whether this level can be maintained. So looking at the stablecoin chart is crucial. Even a mild panic can turn the market red in no time.