Bitcoin Likely to Consolidate Before Recovery: Key Reasons Explained

A rise in stablecoin deposits on exchanges is generally viewed as a sign of increased buying interest in cryptocurrencies.

While USDC dominance has increased, the buying momentum in the US remains absent.

Consolidation Predicted Amid Market Turmoil

Lately, USDC issuance has grown significantly, resulting in a notable inflow of the stablecoin into exchanges. During this period, however, deposits of its rival, USDT, have been declining. Interestingly, USDC deposits reached their highest point on January 20, which coincided with President Trump’s inauguration.

According to the latest analysis by CryptoQuant, this might indicate an attempt to boost pro-crypto policies in the US and reinforce USDC’s position, which is issued by the US-based company Circle.

However, Bitcoin’s price has since dropped back below $100,000 after a correction on Monday morning. Additionally, the Coinbase Premium has turned negative once more, indicating that US investors’ buying activity has not yet materialized.

There has also been growing speculation about a potential price bubble in United States artificial intelligence (AI) tech stocks, driven by the emergence of China’s DeepSeek AI model. This has intensified concerns about corrections in risk asset markets, which is potentially leading cryptocurrency investors to exercise greater caution.

Given the current circumstances, CryptoQuant’s data stated that Bitcoin is more likely to experience an extended consolidation phase before any signs of recovery appear rather than staging a quick rebound.

“Thus, it is important to approach the market with a long-term perspective rather than a short-term one. I remain optimistic about Bitcoin’s long-term outlook.”

Muted Optimism for Bitcoin Until March

The latest consolidation outlook is further validated by QCP Capital’s update, which stated that it does not foresee a near-term Bitcoin rally without confirmation of a Strategic BTC Reserve. The Trump administration’s evaluation of a “national digital asset stockpile” has failed to sustain bullish momentum.

Options markets also hint at muted expectations, with Calls skewed for March onward, signaling limited optimism until the end of Q1. Market volatility remains elevated ahead of the FOMC meeting on January 30. However, the trading firm expects Bitcoin to stay resilient and trade within its current range despite broader uncertainty in equities and geopolitics.