Bitcoin rushes towards 500,000? The emotional, institutional, and stablecoin-driven frenzy in the encryption market.

Written by: Luke, Mars Finance

On the stage of cryptocurrency, market cycles resemble a symphony, combining scientific rigor with dramatic tension. Since February 24, 2024, the CryptoQuant bull-bear market cycle indicator has continuously signaled a bear market, casting a shadow over the market. However, as Bitcoin breaks through the $100,000 mark, the market begins to show subtle yet exhilarating changes. For the first time in several weeks, the indicator has flashed a bullish signal, although the signal strength is weak (with a coefficient of only 0.029), its mere appearance has ignited hope among investors. Even more notably, the bull-bear 30-day moving average (30DMA) has begun to rise, suggesting a potential breakthrough of the 365-day moving average (365DMA). Historically, this crossover often heralds the beginning of a parabolic rise for Bitcoin.

At the same time, the confidence of institutional investors has injected new momentum into the market. BlackRock CEO Larry Fink boldly predicts that bitcoin will exceed $500,000 in the next 5 to 10 years, and its market capitalization is expected to reach $10 trillion. Citibank's latest report further paints an optimistic outlook for the market, with the expansion of the stablecoin market likely to push Bitcoin into the price discovery phase, which could reach $285,000 in 2030 and even close to $475,000 in an optimistic scenario. This bull market, driven by a combination of retail sentiment, institutional endorsements, and stablecoin growth, is reshaping the logic of the crypto market. Are we at the beginning of a new bull market – a symphony of sentiment-driven frenzy, institutional-backed robustness, and stablecoin expansion?

The divergence of the traditional bull market script

In the past, the cryptocurrency bull market followed a familiar pattern: lending rates on platforms like AAVE soared, funding rates on centralized exchanges (CEX) were high, and a large amount of capital flowed into leveraged positions. These factors formed a self-reinforcing cycle, where borrowed funds fueled speculative trading, pushing prices to dizzying heights. However, the current market cycle has broken this script. Despite the soaring price of Bitcoin and the revitalization of altcoins, AAVE's lending rates unexpectedly remained stable, and CEX's funding rates were also unusually moderate. The absence of this "funding rate bull" or "lending rate bull" indicates a fundamental change in the driving forces of this market cycle.

The market is no longer reliant on leveraged capital, but is instead driven by a wave of enthusiasm fueled by spot trading. Funds are continuously flowing in from off-exchange sources, bypassing traditional on-chain lending protocols and structured financial products. This influx of capital is characterized by a "fast in, fast out" approach—investors rush in with cash, chasing short-term gains rather than building long-term leveraged positions. The result is a more agile, flexible market that is heavily influenced by sentiment, rather than one supported by structural financial engineering.

The rise of the market driven by emotions

This emotion-driven frenzy is vividly reflected in the surge of Meme coins across multiple blockchains. On the Solana chain, Meme coins such as Moodeng, Goat, Trump WIF, Pnut, and Act have ignited the enthusiasm of retail investors. The Meme coin ecosystem on Ethereum, including established projects like Pepe, Floki, People, and Neiro, continues to thrive. Even emerging chains like Sui have welcomed a Meme coin craze, with projects like Hippo becoming the focus. These tokens are driven by community hype and viral marketing, symbolizing a market dominated by narratives and momentum.

Unlike previous bull markets, where capital primarily flowed into structured DeFi protocols or leveraged trading, a significant amount of liquidity is now directed towards participatory on-chain activities. Investors are actively engaging in staking, re-staking, minting, and providing liquidity on decentralized exchanges. These "native on-chain behaviors" are driven by community incentives, such as expectations of liquidity staking token (LRT) airdrops and the Meme coin craze. This dynamic has created a "consensus bull market" — no longer a broad price surge, but rather more selective opportunities that depend on specific scenarios. The key to success lies in choosing the right narrative or ecosystem, whether it is Solana's Meme coin craze or Ethereum's DeFi protocols.

Institutional Endorsement and the Rise of Stablecoins

While retail sentiment is high, the participation of institutional investors has injected stability and confidence into the market. BlackRock CEO Larry Fink's prediction is particularly compelling. "We're going to see Bitcoin well over $500,000 in the next five to 10 years, which would be an asset of more than $10 trillion," he said. This view not only demonstrates the institution's recognition of Bitcoin's long-term value, but also marks the transformation of cryptocurrencies from a marginal asset to a mainstream financial asset. There are currently 11 Bitcoin spot ETFs in the U.S. market, with a total AUM of $118.59 billion. These ETFs provide traditional investors with easy exposure to Bitcoin, further boosting their mainstreaming.

Citibank's latest report adds another layer of optimism to the market. According to Coingape, Citi predicts that the total supply of stablecoins will grow to $1.6 trillion in the baseline scenario and $3.7 trillion in the optimistic scenario, according to Coingape. According to the analysis, there is a historical correlation between the expansion of the stablecoin market and the appreciation of the price of Bitcoin. If the stablecoin supply grows by 6.7x, the price of Bitcoin could grow by a factor of 3 to 5 based on historical ratios. This means that by 2030, the price of bitcoin may reach $285,000, or even close to $475,000 in an optimistic scenario. Even under conservative assumptions (i.e., only 25% of stablecoin growth translates into an increase in the price of bitcoin), bitcoin could still grow by 200% to 250% from current levels, and the price is expected to be between $190,000 and $237,500.

The growth of stablecoins not only reflects the deepening of the crypto market but also provides a new source of liquidity for Bitcoin. As the "blood" of the crypto ecosystem, stablecoins are widely used in trading, payments, and DeFi activities, and their expansion in scale means that more funds may flow into core assets like Bitcoin. Especially in the potentially regulatory easing environment brought by Trump’s policies, the growth of stablecoins may further catalyze Bitcoin into the price discovery phase, injecting long-term momentum into the market.

Liquidity Paradox: Flexible yet Fragile

The flexibility of market liquidity is both an advantage and a weakness. Without the deep pool of leveraged capital from the previous bull market, this round of trading lacks the "deep water" that buffers price corrections. This makes the market more susceptible to sharp fluctuations. As an observer noted, "When it rises quickly, it also falls sharply without hesitation." Due to the lack of significant spot resistance—coupled with the absence of traditional supply ranges—Bitcoin and altcoins can easily break through key resistance levels. However, when sentiment shifts, the lack of structural support could lead to severe cascading declines.

The derivatives market has further intensified volatility. Many believe this is a "contract-driven bull market," where futures and perpetual contracts amplify price fluctuations. The current upward pressure comes more from leveraged long positions rather than organic spot buying. However, these positions are a double-edged sword. Contracts that drive rapid increases may trigger liquidations when the market reverses, especially in cases where a large number of stop-loss orders are clustered below.

Supply-side bull market

The most intriguing feature of this round of market is that it is defined as a "supply-side bull market" rather than a "fund-driven bull market." The influx of funds from new users is not through leveraged borrowing, but through organic, community-driven mechanisms. Airdrop expectations, Meme coin speculation, and grassroots community participation have attracted fresh capital. These funds have not remained in lending protocols or structured products, but have actively participated in the on-chain ecosystem, from staking to liquidity provision.

This supply-side dynamic is reshaping market structures. Unlike the broad and indiscriminate rises driven by leverage in the past, today's market rewards selectivity. Not every token or project will skyrocket; returns are concentrated in specific ecosystems or narratives. For example, the meme coin craze of Solana benefits from its low transaction costs and active community, while Ethereum's DeFi protocols attract users looking to earn profits through re-staking and liquidity provision. This selectivity has created a fragmented but more resilient market, with success depending on an understanding of the underlying drivers of the ecosystem.

Black swan and the shadow of human manipulation

Despite the bullish signals, institutional endorsements, and promising outlook for stablecoins, the market must remain vigilant. Emotion-driven markets are susceptible to external shocks. One commentator warned of the potential for "man-made black swan events," pointing to a combination of leveraged long positions, concentrated stop-loss orders, and geopolitical or regulatory changes. High-profile figures like former President Trump, whose public statements have repeatedly shaken the crypto market, add uncertainty to the market.

In addition, the current market structure indicates that the rise is more due to insufficient selling pressure rather than overwhelming buying demand. As one analyst stated: "The continuous breakthroughs in the supply range are rooted in the lack of real spot resistance." This dynamic may lead to a "watering effect," where prices rise rapidly until they reach a critical point, triggering profit-taking or a liquidation wave. If this occurs, the lack of deep liquidity pools may exacerbate the downturn, leading to a pullback as swift as the rise.

A new paradigm in the crypto market

With the CryptoQuant bull-bear indicator turning bullish, BlackRock's optimistic forecast, the booming development of Bitcoin spot ETFs, and Citibank's outlook on stablecoins, the crypto market stands at a crossroads. This is not a past bull market dominated by leverage and capital intensity, but a symphony driven by retail sentiment, institutional endorsement, and stablecoin expansion. Spot buying, the meme coin craze, and participatory on-chain activities fuel this movement, while institutional funds and stablecoin growth provide long-term anchors. Liquidity is flexible yet fragile, capable of driving rapid increases but also prone to severe corrections. The market rewards investors who can navigate fragmented narratives, from Solana's meme coin ecosystem to Ethereum's DeFi protocols.

However, the shadow of volatility always looms. As leveraged contracts amplify price fluctuations, external catalysts are stirring, and the market trajectory is full of uncertainty. The current bullish signals, institutional confidence, and the prospects of stablecoins are delightful, but they also come with a warning: in this new type of bull market, flexibility and selectivity are crucial. Investors must tread carefully, choose scenarios wisely, and remain vigilant to cope with the next turning point of this unpredictable crypto saga.