Bitcoin's Bear Market Causes Interesting Patterns to Emerge in Stablecoins

With Bitcoin going through a bear market that has caused it to plunge near the $30,000 level, analysts have noticed an interesting pattern forming with regard to stablecoins. Over the last five days, the trading volume of stablecoins, those digital currency tokens pegged to the value of fiat money such as the United States dollar and the British pound sterling, has shot up from $15 billion to $21 billion.

The relation between stablecoins and Bitcoin can be summed up as follows: Very few traders use these tokens for retail payments, but they use them extensively to cash out of their cryptocurrency market positions. Stablecoins also make it easier for traders to acquire Bitcoin, and this suggests that bullish investors may be trying to push BTC/USD back towards the highly psychological $50,000 exchange rate. The problem with this development is that it has been historically short-lived, which means that it could end up as a dead cat bounce situation.

A dead cat bounce happens when a recovery does not last long enough to make a significant impact on a bear market. What ends up happening with the bounce is a continuation of the trend for the same time period. In other words, we could be looking at a few more weeks of Bitcoin dancing between the $Q30K and $40K levels as day traders try to buy on the dip repeatedly.

While short-term and temporary, rebound of asset prices from a falling market are more likely than are long-term and permanent recoveries of asset prices from a falling market, the former do not occur in isolation or in isolation to each other, but in close proximity.

If a market has a trend for which it has already broken or been rebounded, it could eventually reach the market trend level established by the longest run of market momentum to reach an acceptable trend level, or at least a more meaningful trend that investors can latch onto. The term "fundamental tendency of the market" may be used to indicate the general direction of a series of related factors, which pretty much explains what is happening now in the world of stablecoins.