Market Watchers May Need to Brace for Potential Headwinds

According to Jason Pizzino, Tether's dominance in the overall crypto market could foreshadow a cooling-off period for Bitcoin and other digital assets.

The crypto market may be heading for some turbulence, according to trader and analyst Jason Pizzino. In a recent market analysis, Pizzino pointed out an indicator that could be indicating a potential cooling-off period for Bitcoin and other digital assets.

This indicator is none other than Tether (USDT) dominance, which is measured by dividing the market cap of USDT by the entire crypto market cap. The ratio is expressed as a percentage and is often denoted as USDT.D.

As capital moves between risk assets (like Bitcoin and other cryptos) and stablecoins like Tether, the Tether dominance percentage tends to change. A rising ratio typically signifies that traders are pulling out of risk assets and putting their capital into Tether—a move usually associated with a preference for less volatile assets or an indication of defensive positioning.

Currently, Tether dominance is around 4.53%, which is notably higher than the 3.7% threshold that Pizzino highlighted. According to the analyst, unless we start seeing this number decrease as we enter Q3, it might be a sign that investors’ appetite for higher-risk assets is diminishing.

“If we don’ λε видим ότι το ποσοστό αλλάζει και αρχίζει να κατεβαίνει σε σχέση με το σύνολο της περιουσίας τεραστης όπως BTC, ETH, ή altcoins όπως υπολογίζεται από το CoinGecko, traders might want to scale back on overly aggressive plays,” Pizzino stated.

While some maintain that capital flowing directly into Bitcoin ETFs from fiat could alter this dynamic, Pizzino advises keeping an open mind and not dismissing the importance of Tether dominance just yet.

According to Pizzino, the correlation between Tether dominance and crypto price action has been a strong factor in his analysis, and it’s something that shouldn’t be disregarded lightly. However, he does acknowledge the possibility of new trends emerging with institutional flows via ETFs, which could lead to a change in this correlation over time.