Bitcoin 100% Rally to Repeat? Tether Market Cap Indicator Signals 2022 Déjà Vu

▲ Bitcoin (BTC) / AI-generated image

Bitcoin (BTC) has recently been fluctuating around the $65,000 level. However, changes in Tether (USDT) market capitalization are signaling patterns similar to those seen at the bottom of the 2022 bear market, suggesting the possibility of a major rebound.

According to crypto-focused media outlet Cointelegraph on February 23 (local time), Tether’s 60-day change in market capitalization has fallen below negative $3 billion. Crypto analyst Moreno noted that this indicator has crossed the threshold for the first time since late 2022, when Bitcoin was forming a bottom near $16,000. While a sharp decline in Tether supply typically signals tightening liquidity in the market, it is paradoxically also interpreted as a sign of capitulation, indicating that selling pressure has reached exhaustion.

Recently, the market witnessed three separate days of Tether redemptions exceeding $1 billion each. Moreno diagnosed that such large-scale capital outflows tend to occur during periods of extreme volatility or near localized market bottoms. He added that “this dynamic tends to appear toward the end of a downtrend rather than at its beginning,” implying that the current liquidity stress may ease in the near future.

During the 2022 episode, after Tether supply stabilized, Bitcoin recorded a strong rally of more than 100% over the following months. With Bitcoin currently trading within a range between $65,000 and $70,000, market attention is focused on whether this indicator will once again serve as an accurate bottom signal. An expansion in stablecoin supply or a halt in the current contraction is expected to mark the starting point of an asymmetric upward reversal.

The Bitcoin market now faces a critical juncture between the technical bottom suggested by Tether’s supply metrics and ongoing macroeconomic uncertainty. The cessation of the $3 billion supply contraction and the normalization of liquidity conditions will likely serve as key variables determining price direction in the coming months. Large investors are monitoring signs of selling exhaustion while timing the establishment of new positions.

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