Yesterday I checked the market capitalization of stablecoins, and today I looked at the situation of spot BTC ETFs.
It's fair to say that the current market weakness is primarily due to the outflow of funds from ETFs.
However, despite this, considering both stablecoin market capitalization and ETF performance,
my assessment of the current market remains:
It's not yet a bear market; we're currently in a mid-term correction. The repricing range
is more like a deep correction within a bull market, rather than the start of a new bear market.
ETF Assets Under Management
Looking at ETF-related data reveals many relevant indicators. Here, I'll share the two most important ones:
These are crucial indicators determining the long-term trend of the crypto market.
I've also thoughtfully highlighted ETF data from January to April of this year, for reasons explained in the previous post—they appear most similar to the current correction.
Also, data for the bear market from 2021 to 2023 is unavailable in ETFs because the first ETF wasn't launched until 2024.
As you can see on the far right of the image, ETF holdings show a significant decline.
This is because, compared to stablecoins, ETFs primarily derive their funds from traditional financial institutions like private equity firms and pension funds, and their asset allocation is global.
Therefore, when BT... When C reached its peak of 120,000 in October, BTC's cost-effectiveness had already declined significantly. Coupled with the crash on October 8th, traditional money would likely turn its attention to traditional assets like gold and bonds, withdrawing funds from crypto.
It's important to note that ETFs directly purchase crypto with fiat currency, which is a different system from stablecoins.
This isn't determined by size; currently, the total market capitalization of stablecoins is 260 billion, while ETFs are around 160 billion.
The reason is the supply and demand dynamics influenced by ETFs. For example, when Blackstone buys BTC, that portion of BTC is held in custody and disappears from the liquidity pool.
Simply put, once bought, it's not easily sold. Therefore, the influx of ETFs drives up the price of BTC, acting as a price floor.
On the other hand, institutions that use stablecoins to buy crypto are generally exchanges and market makers. Even if the crypto market weakens in the short term, they won't flee en masse; they'll simply hold USDT and wait for signals.
This is why now... The reason why stablecoin market capitalization is steadily rising while ETF size is declining:
However, a closer look at the blue circled area reveals a steady pullback in ETF holdings around November 25th.
This is similar to the pattern outlined in the blue circle on the left, where the first wave of decline ended and a slow pullback began.
However, the left-side trend will likely see several more minor pullbacks, and historically, the 2024 pullback lasted four months, while the current pullback has only lasted one month.
The time frame and trend are largely consistent.
However, the possibility of a true bear market like the one in 2021, mentioned in the previous post, cannot be ruled out, although there are no clear signs of a true bear market yet.
Total Net Inflow and Outflow of ETFs
This indicator can be used to observe short-term trends. Similarly, the right side has seen continuous positive inflows since November 25th, indicating the right direction, but the strength is insufficient.
Observing the pullback on the left— —The current inflow is more like an institutional test, a rebound.
Even with a series of large positive inflows like on the left side, a significant drop in BTC followed.
Market Assessment
Judging from the market capitalization of stablecoins and ETFs, the current market is not a bear market like the one in 2021, and it doesn't even qualify as a bear market yet.
The current market is more like a correction, highly similar to the rally in January 2025.
We're nearing a directional breakout.
Cryptocurrency funds are holding USDT and waiting for signals; they'll rest if the market is bad.
Traditional money is testing the waters; if things don't look right, it will continue to flow out and invest in traditional assets.
We need to observe the total net inflow and outflow of ETH. Only if there are more than 1 billion USDT inflows per day for more than 10 consecutive days can we conclude that the correction is over.
But as things stand, I feel it will continue to decline; the correction is likely not over yet.