There are three main reasons Bitcoin surged to a new all-time high, namel high stablecoin inflows, clean break of the $38,000 resistance area, and a prolonged consolidation phase.
Over the last few days, despite Bitcoin’s consolidation below $38,000, on-chain analysts pinpointed the continuous increase in stablecoin inflows.
According to data from CryptoQuant, the Stablecoin Supply Ratio (SSR) rose notably as it rallied from the mid-$30,000 region.
As reported by Cointelegraph, the SSR indicator shows the ratio of the market cap of Bitcoin relative to the aggregated market cap of stablecoins.
When the price of Bitcoin rises in tandem with the SSR ratio, then it means that it is likely being driven by sidelined capital re-entering the market.
This trend is highly optimistic because it indicates that the rally was not just driven by an over-leveraged futures market. Indeed, it was genuine demand from the spot market that led the uptrend.
Atop the high stablecoin ratio, analysts also pinpointed the decline in selling pressure coming from miners.
Bitcoin was consolidating under the $38,000 resistance area for a prolonged period. This presented a risk to the short-term bull cycle of Bitcoin.
When the price of Bitcoin hovers under a key resistance area for a long time, it increases the probability of BTC dropping to a lower support area to tap lower liquidity.
A relatively long consolidation period typically leads to two scenarios: a severe breakdown or a major breakout.
If Bitcoin rallies without strong fundamentals to support the rally, there is a bigger chance that the consolidation leads to a deep correction.
However, in the case of Bitcoin in the past three days, its consolidation phase under $38,000 was backed by rising stablecoin inflows, a high Coinbase premium, and a generally high trading volume across both spot and futures markets.
Therefore, even though the futures market remains highly leveraged and overcrowded, BTC has been able to push through the resistance area despite the risk of a long squeeze.
In the near future, there are several reasons that make the rally sustainable. First, the stablecoin inflows are not slowing down.
Second, today’s rally reversed the bearish market structure to a bullish short-term trend across lower time frames.
As long as Bitcoin remains above the $38,000 level, its near-term bullish market structure would remain intact.