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Bitcoin Faces Potential as Analyst Warns of Short-Term Liquidity Squeeze

Key Insights: 

  • Bitcoin may experience a short-term dip as liquidity tightens, but analysts predict a long-term recovery fueled by global trends.
  • Market analyst Cole Garner warns of a potential liquidity-driven downturn, suggesting Bitcoin could hit range lows before rebounding.
  • Despite short-term volatility, Bitcoin’s long-term outlook remains positive, with institutional interest and investor confidence remaining strong.

According to market analyst Cole Garner, Bitcoin’s price action may experience a significant downturn before a major rally occurs. In his latest analysis on X (formerly Twitter), Garner suggested that Bitcoin could drop to long-term range lows, warning of a “capitulation incoming” for the leading cryptocurrency. Bitcoin is valued at $61,224, up 0.6% in the last 24 hours, with a market cap of $1.19 trillion.

In his analysis, Garner cited declining liquidity as a critical driver of the potential dip, stating that tightening liquidity on-chain might lead to downward pressure on Bitcoin’s price. His assessment, however, also indicated that the broader global liquidity trends could ultimately favor Bitcoin in the long term.

Liquidity Decline Signals Near-Term Downside

Garner’s analysis pointed out that liquidity, both on-chain and in the broader financial system, shows signs of tightening. He referred to his Liquid Vision index, which tracks global central bank liquidity, to illustrate the current situation. “Liquidity on-chain is tightening: I smell capitulation incoming,” Garner summarized in his post, hinting that Bitcoin might face additional downside risk before bouncing back.

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The analyst focused on central bank policies, particularly in China and the United States. He highlighted recent decisions by the People’s Bank of China (PBoC) and the U.S. Federal Reserve. 

While China’s economic stimulus initiatives had raised hopes among risk-asset traders, the PBoC’s lack of further action in recent weeks has led to market disappointment. Garner believes this could further pressure Bitcoin’s price, stating, “If China doesn’t ring that bell, Fed or Japan should do the job. But more downside could come first.”

Stablecoin Supply and Bitcoin’s Future

In addition to liquidity trends, Garner also flagged a decline in the supply of major stablecoins such as Tether (USDT) and USD Coin (USDC). The shrinking stablecoin supply could contribute to Bitcoin’s short-term bearish outlook. Stablecoins, often used as a measure of liquidity in the cryptocurrency market, play a crucial role in Bitcoin’s price stability.

Garner indicated that Bitcoin could decline to lower prices before reaching new highs, calling the situation a facepalm moment. However, he remains optimistic about Bitcoin’s long-term potential, pointing to global liquidity as a sign of eventual recovery.

Bitcoin’s Current Market Metrics and Investor Sentiment

Bitcoin’s price has hovered around $60,554, with a 24-hour trading volume of $28.29 billion. Bitcoin has experienced fluctuations throughout the year, with notable drops and recoveries between $50,000 and $72,000. Bitcoin hit its lowest point in September at $50,000 before rebounding to the $60,000 range.

Despite the recent decline, Bitcoin remains a popular asset among long-term investors. According to market data, approximately 83% of Bitcoin holders are currently in profit, with 71% of them holding their coins for over a year. This indicates strong confidence in Bitcoin’s long-term potential, even in the face of short-term volatility.

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Source: IntoTheBlock

Moreover, Bitcoin continues to attract significant institutional interest. In the past seven days, transactions exceeding $100,000 totaled $110.54 billion, reflecting large-scale activity. Additionally, Bitcoin saw net outflows of $252.13 million, suggesting that investors are accumulating the cryptocurrency by moving coins off exchanges.

Market Outlook: Short-Term Challenges, Long-Term Optimism

Bitcoin’s recent price movements have been influenced by various factors, including global economic policies, liquidity trends, and market sentiment. The U.S. Dollar Index has risen slightly, and Bitcoin’s dominance has fallen to 56.68%. The Crypto Fear & Greed Index, which tracks market sentiment, plunged into fear territory at 39, indicating caution among traders.

Source: Coinglass

Despite these challenges, Bitcoin’s long-term outlook remains positive. While short-term volatility is likely, especially with declining liquidity and stablecoin supply, many analysts believe Bitcoin is positioned for a strong recovery in the coming months.

Cryptocurrency experts forecast that by December 2024, Bitcoin could see a maximum trading value of around $63,860, with a potential dip to a minimum of $60,916. This suggests that Bitcoin’s price could stabilize near its current levels before heading into a more bullish phase.


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Curtis Dye

Curtis is a cryptocurrency news and analytics author with a focus on DeFi, BLockchain, CeFi, NFTs etc. He has publication skills such as SEO optimization, Wordpress, Surfer tools and aids his viewers with insights on the volatile crypto industry.

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