Bitcoin Faces Oversold Zone Amid 11% Stablecoin Market Cap Surge

Bitcoin's outlook is improving as the market capitalization of Tether USD (USDT) expands, signaling increased liquidity and potential price momentum. Over the past 60 days, USDT's market cap has grown by $5.75 billion, surpassing its 60-day simple moving average. This expansion typically indicates fresh capital entering the crypto market, which could support Bitcoin's price.

Additionally, the overall stablecoin market cap has increased by 11% in the past 60 days, reaching $226.1 billion as of March 13. This influx of liquidity, however, has not yet triggered a short-term rebound in the crypto market. The total market cap has fallen by 3.2% over the past 24 hours, reaching $2.72 trillion, while Bitcoin has decreased by 3.3%, trading at $80,411.98.

On-chain data suggests that Bitcoin has entered an oversold zone following a period of strong correction. The proportion of Bitcoin holdings for less than one month surged in March and December 2024, reaching 23% and 24.5%, respectively. This pattern preceded a correction, bringing the Market Value to Realized Value (MVRV) ratio to 1.8, close to the 2024 correction’s low of 1.71. If Bitcoin falls to the $70,000 range, the MVRV ratio would surpass levels seen during past correction lows.

Market sentiment has weakened significantly, with altcoins surrendering most of the gains made over the past year. This suggests that further declines may not be necessary to reset the market, as it has already undergone substantial deleveraging. Entering an oversold zone typically increases the probability of a rebound, though market conditions remain challenging.

The final phase of an upward cycle often involves heightened risk and investment difficulty, but as selling pressure diminishes, the likelihood of a price recovery grows. Key factors to monitor in the coming period include the strength and magnitude of any rebound, whale movements, and changes in on-chain data. Additionally, correlations with traditional stock markets and macroeconomic trends will shape Bitcoin’s trajectory.

It is still too early to conclude that the market has entered a full-fledged bear cycle. The current conditions suggest a potential for price recovery as the market stabilizes and liquidity continues to increase. Investors and traders should remain vigilant and monitor key indicators to navigate the volatile crypto landscape effectively.