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Is the Bitcoin Rally Built on Shaky Ground? Stablecoin Inflows Say Yes
Key Insights
Bitcoin is showing signs of strength once again, after rallying by over 12% in the past week.
As it stands, the cryptocurrency is now sparking discussions about a possible price increase towards the $100,000 zone.
The spot Bitcoin ETFs in the US recorded nearly $913 million in inflows in a single day, with optimism now flying high.
However, amid the excitement, analysts are urging investors to proceed with caution:
Especially concerning one indicator in particular.
A Rally Fueled by ETF Demand
22 April saw the US spot Bitcoin ETFs record $912.7 million in inflows, according to data from Farside investors.
This sharp increase in demand marks a lead by institutional investors, as well as a strong appetite for Bitcoin exposure.
As of 23 April, the cryptocurrency was trading at around $93,700 and is now up by more than 11% over the past seven days.
Bitcoin’s ongoing rally is also supported by bullish technical patterns.
One of the most interesting of these is the formation of the falling wedge on its daily chart, which indicates strong chances of a bullish reversal.
The price of the cryptocurrency has broken out of this pattern and is likely to continue its comeback towards the upside.
In Bitcoin’s case, analysts are seeing a possible 20% surge from the breakout point, which could lead to a price jump towards $102,000.
The recent flip of the $85,000 zone into support has also reinforced this view.
On the other hand, the RSI is rising but is still trading underneath the overbought threshold.
This means that Bitcoin has a lot of room to grow while the bulls remain in control.
But the Stablecoin Indicator Tells a Different Story
Despite the positive signals, not everyone is convinced that the ongoing rally is sustainable.
At least not yet.
According to the head of research at 10x research, Markus Thielen, one indicator is lagging despite the bullishness.
This metric is known as stablecoin minting.
Naturally, stablecoins like Tether (USDT) and USD Coin (USDC) are often seen as gateways for new capital entering the market.
When new stablecoins are minted, it typically means that investors are gearing up to buy crypto assets, including Bitcoin.
“Our stablecoin minting indicator has yet to return to high-activity levels,” Thielen said in a recent market report. “We remain cautious about the sustainability of the current Bitcoin rally.”
He further emphasized that while futures leverage is increasing, it could mean that short-term traders are betting on more gains.
However, the lack of strong stablecoin inflows indicates that long-term, “stickier” capital has not yet entered the market fully.
Resistance Levels and the Risk of a Reversal
So where might Bitcoin reverse downwards if the bears eventually win?
According to Thielen, Bitcoin faces strong resistance around $95,000. This means that if the price fails to break through and hold its head above this mark, it could trigger a short-stop liquidation spree and drag the price lower.
On the other hand, a daily close above the $91,575 zone could validate the bullish case and pave the way for a test of higher highs.
If the price of the cryptocurrency breaks above the $94,000 zone with strong volumes, analysts believe that the next leg-up could be fast.
Bitcoin has so far completed the break above the $94,000 zone and is looking to claim the $95,000 zone.
If any sudden reversals happen from current price levels (especially with a Bitcoin break below $86,562), this could invalidate all bullish outlooks and send the rest of the market into a death spiral.
For now, the outlook for Bitcoin is optimistic, but cautiously so.
The bulls have the wind on their backs. However, investors should not underestimate the bears or their influence over the market.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions