Bitcoin’s (BTC) rapid recovery from below $90,000 since Monday suggests a bullish outlook. However, one factor casts doubt on the durability of these gains, indicating the possibility of significant downside volatility if the upcoming US inflation data comes in hotter than expected on Wednesday.

This factor is the supply of large stablecoins, which has stagnated, indicating the absence of new capital injection into the market. Data tracked by Glassnode shows that the supply of the top four stablecoins by market capitalization – USDT, USDC, BUSD and DAI – has stabilized around $189 billion, representing a 30-day net change of just 0.37%.

Stablecoins are cryptocurrencies with values ​​tied to an external reference such as the US dollar. These tokens are widely used to finance cryptocurrency purchases and served as a safe haven during the 2022 bear market.

The recent slowdown in new liquidity via stablecoins, suggesting a weakened buying environment as it heads into the US Consumer Price Index (CPI), stands in stark contrast to the expansion of stablecoin liquidity observed during the November-December rally and early of last year.

“The fact that the rally in late 2024 required nearly 2x the capital infusion for a minor capital gain underscores the speculative demand and liquidity-driven momentum that has since cooled,” Glassnode said in a Telegram note.

The data to be expected at 13:30 UTC Wednesday, is expected to show that the cost of living rose 0.3% month-on-month in December, matching November’s pace. Year-on-year figures are seen printed at 2.9%, up from November’s 2.75. The core figure, which strips out the volatile food and energy component, is expected to have risen 0.2% month-on-month and 3.3% year-on-year.

An above-forecast headline/core number is likely to reinforce recent concerns that the central bank is less aggressive in cutting interest rates than expected. Those concerns, reinforced by Friday’s blowout jobs report, were partly responsible for BTC falling below $90,000 on Monday.

The recent drying up of stablecoin liquidity, often heralded as dry powder waiting to be deployed for crypto buying, stands in stark contrast to the $27.3 billion in inflows recorded in November and December that partially lubricated the BTC bull from $70,000 to over $108,000.

Meanwhile, a much less steady coin inflow of $14.68 billion was seen in the first quarter of 2024, with prices rising nearly 70% to over $70,000.