#110 On-chain Insights by IT Tech - Week 1 Bitcoin Analysis & Highlights
On-chain Insights: Altcoin Season Peaks, Institutional Sentiment Returns, and MiCA’s Impact on Stablecoins
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Table of contents:
Partnership with WymienBitcoina.pl
Crypto Weekly: TOP 10 News
Current market situation
Altcoin season performance
Correlation between USDT and USDC market caps and Bitcoin price
Coinbase Premium Index Signals Institutional Sell Pressure Amid Bitcoin Pullback
Paid newsletter subscription - support content development
Newsletter issue summary and forecast
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2. Crypto Weekly: TOP 10 News.
Here's an update on the Crypto Weekly: TOP 10 News from last Monday to now:
IRS Grants Temporary Relief on Crypto Tax Reporting: Amidst legal challenges, the IRS has provided temporary relief on the new crypto tax reporting rules, offering some respite to crypto traders and exchanges.
U.S. Bitcoin Reserve Proposal: The idea of a U.S. Bitcoin reserve has sparked discussions, with Metaplanet's CEO predicting it could lead to a global race to hold Bitcoin in national reserves.
Coinbase Shares FDIC Letters: Coinbase has made public unredacted letters from the FDIC, which advised banks against offering basic Bitcoin services. These letters highlight the tension between traditional banking and crypto.
VanEck CEO's Bitcoin Investment Advice: VanEck's CEO has recommended doubling down on Bitcoin investments as a hedge for 2025, amidst increasing institutional interest in cryptocurrency.
FTX Repayment Plan: FTX has announced plans to repay $16 billion to its creditors starting this week, potentially injecting a significant amount of liquidity back into the crypto market.
Crypto ETFs Record High Inflows: Crypto ETFs, particularly Bitcoin spot ETFs, have seen nearly $1 billion in inflows this week, with major players like Fidelity and Blackrock leading the surge.
Do Kwon's Legal Battle: Do Kwon has pleaded not guilty in a Manhattan court to charges related to the collapse of Luna and UST, marking a significant legal event in the crypto space.
Tether's Market Cap Drop: Tether's USDT experienced its largest weekly market cap drop since the FTX collapse due to new MiCA regulations in Europe, although it remains one of the largest stablecoins by market cap.
Aave's Record Net Deposits: Aave has seen its net deposits reach $33.4 billion, surpassing even the 2021 bull market levels, indicating strong growth in decentralized finance.
Crypto Market Sentiment: Posts on X reflect a bullish sentiment, with mentions of increasing DEX volumes, stablecoins hitting $200 billion in size, and Bitcoin supply decreasing on exchanges, suggesting a positive outlook for the market.
3. Current market situation.
Last week, the cryptocurrency market displayed strong bullish momentum, with most major assets closing in the green. Bitcoin (BTC) led with steady growth of +2.85%, ending the week at $97,709, while Ethereum (ETH) outperformed with a +6.36% gain, signaling growing investor confidence in the broader market. Altcoins like Stellar (XLM) and Cardano (ADA) were standout performers, surging +24.76% and +20.82%, respectively, driven by positive ecosystem developments and increasing institutional interest.
Meanwhile, speculative trading fueled strong rallies in meme coins such as Dogecoin (DOGE), which gained +17.43%. However, not all assets fared well; Bitget (BGB) dropped by -18.34%, likely due to profit-taking, and Zcash (ZEC) saw a -7.01% decline amid weaker adoption sentiment. Overall, the market sentiment remains optimistic, with capital rotating into mid-cap altcoins while larger assets like BTC and ETH maintain steady growth. Investors should remain cautious, as the recent rallies could lead to short-term corrections in overbought assets.
4. Altcoin season performance.
The past 60 days have confirmed a strong Altcoin Season, with 47 out of 57 tracked altcoins outperforming Bitcoin. Stellar (XLM) and XRP led the rally with remarkable returns of 350% and 333.1%, respectively, followed by Algorand (ALGO) at 229.2% and Cardano (ADA) at 196.4%. This shift underscores growing investor interest in altcoins as capital rotates from Bitcoin, which posted a more modest return of 29.5% over the same period.
While this trend presents significant opportunities for traders, the heightened volatility in altcoins also increases the risks of sharp corrections. Maintaining a balanced approach and monitoring market conditions will be essential for navigating this dynamic phase.
The crypto market is showing signs of transitioning into an Altcoin Season, as 47 out of 57 altcoins have outperformed Bitcoin over the last 60 days. This shift suggests growing investor appetite for higher-risk, higher-reward assets, particularly as Bitcoin stabilizes near the $100k mark. Historically, such transitions occur after Bitcoin-led rallies, when profits rotate into altcoins.
The Altcoin Season Index highlights this trend, with increasing momentum toward broader altcoin dominance. Traders should remain vigilant, as this phase often brings heightened volatility and opportunities for short-term gains in alternative assets. However, caution is advised, as overextended altcoin rallies can face sharp corrections.
5. Correlation between USDT and USDC market caps and Bitcoin price.
Rising stablecoin market capitalization (USDT and USDC) typically correlates with increasing Bitcoin prices, indicating higher market liquidity and demand.
Conversely, declining stablecoin market capitalization often signals increased crypto selling and lower liquidity, potentially leading to Bitcoin price decreases.USDT Daily Market Cap Change (in million USD):
• 2024-12-30: -79.65M USD
• 2024-12-31: -1,222.82M USD
• 2025-01-01: -378.79M USD
• 2025-01-03: +44.96M USD
• 2025-01-04: +44.85M USD
Net USDT Market Cap Change (30 Dec 2024 - 4 Jan 2025): -1.59 billion USD
USDC Daily Market Cap Change (in million USD):
• 2024-12-30: +140.25M USD
• 2024-12-31: +133.21M USD
• 2025-01-01: -107.62M USD
• 2025-01-03: +1,436.54M USD
• 2025-01-04: +271.48M USD
Net USDC Market Cap Change (30 Dec 2024 - 4 Jan 2025): +1.87 billion USD
Combined Analysis (USDT & USDC): Combined Net Market Cap Change: +282.41 million USD
Insight: MiCA Regulation’s Impact on Stablecoin Liquidity
The observed shift in stablecoin market capitalization from USDT to USDC aligns closely with the impending Markets in Crypto-Assets (MiCA) Regulation, set to take effect in the European Union. MiCA introduces stricter compliance requirements for stablecoin issuers, focusing on transparency, capital reserves, and risk management. USDC, with its established reputation for regulatory compliance and robust backing, appears to be the preferred choice among investors and institutions preparing for these regulatory changes.
Conclusion:
The net market cap change of +282.41 million USD across USDT and USDC underscores overall stablecoin market resilience during this period. However, the -1.59 billion USD outflow from USDT and +1.87 billion USD inflow into USDC signal a significant market preference shift. This shuffle is likely driven by the anticipation of MiCA regulations, with investors favoring USDC’s regulatory alignment and stability. As MiCA comes into full effect, we can expect USDC to solidify its position as a key liquidity provider in the European market, while USDT may face increasing pressure to adapt to the new regulatory landscape.
6. Coinbase Premium Index Signals.
The Coinbase Premium Index measures the price difference between Coinbase Pro (USD pair) and Binance (USDT pair). High premium values may indicate strong buying pressure from U.S. investors on Coinbase.The Bitcoin Coinbase Premium Index is currently hovering near the breakeven point, signaling a significant shift in market sentiment. This metric measures the price difference between Bitcoin traded on Coinbase (USD pair) and other global exchanges (e.g., Binance, USDT pair). A positive premium typically indicates stronger buying pressure from U.S. retail and institutional investors, while a negative premium reflects weaker demand.
The recent recovery to the breakeven level suggests that U.S.-based interest in Bitcoin is returning, potentially driven by institutional activity. Historically, increases in the Coinbase Premium Index have coincided with bullish momentum in Bitcoin’s price, as U.S. demand often leads the global market. This recovery aligns with Bitcoin stabilizing near $98,400, indicating renewed confidence from both institutional and retail participants.
Insight:
Coinbase Premium is back, and it’s a good sign for Bitcoin. It means the U.S. market is feeling more confident in the crypto. If people keep buying, Bitcoin could go up even more. Maybe it’s because things are getting clearer with the rules and the economy is doing well.
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8. Newsletter Issue Summary:
Crypto Weekly: Top 10 News: Highlights include IRS tax relief, U.S. Bitcoin reserve proposals, FTX repayment plans, and MiCA regulations impacting Tether. Bullish crypto sentiment continues with ETF inflows and strong DeFi growth.
Current Market Situation: BTC and ETH posted gains of +2.85% and +6.36%, respectively. Stellar (XLM) and Cardano (ADA) outperformed with +24.76% and +20.82%. Meme coins like DOGE rallied, while assets like BGB saw profit-taking.
Altcoin Season Performance: Altcoin Season is confirmed, with 47/57 altcoins outperforming Bitcoin. Stellar (350%) and XRP (333%) led the surge, while Bitcoin’s modest +29.5% return highlights capital rotation.
Stablecoin Correlation with Bitcoin: USDT outflows (-1.59B USD) contrasted with USDC inflows (+1.87B USD), showing shifting market preference due to MiCA regulations. Combined netflow: +282.41M USD.
The Coinbase Premium Index recovered to breakeven, signaling renewed U.S. institutional interest in Bitcoin as it stabilizes at $98.4K.
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Forecast for the Upcoming Week:
Market Consolidation: Bitcoin is expected to consolidate around $98-100K as institutions re-enter the market cautiously.
Altcoin Volatility: Continued opportunities in altcoins, but overbought assets may correct. Monitor momentum shifts.
Stablecoin Dynamics: Further MiCA-related movements may increase USDC dominance over USDT.
Institutional Indicators: Rising Coinbase Premium Index suggests further institutional accumulation.
DeFi and ETFs: Growth in DeFi and ETF inflows could push crypto sentiment higher.
Stay alert and monitor key indicators for better market insights. Track upcoming US and EU events for free using the Economic Calendar.
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This concludes this issue. I hope you have a pleasant end to your weekend and a great week ahead.
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IT Tech