Bitcoin (BTC) may have reclaimed $80,000, but one analyst warns that the move lacks the foundation to hold.
On May 4, the top cryptocurrency finally managed to break past its $80,000 barrier. Not once, but twice.
The first time it did was in the wee hours of Monday. However, it pulled back briefly and dropped to the zone of $78,000 as mixed reports of escalating crisis in the Strait of Hormuz spread.
At press time, Bitcoin had recovered and was trading at $80,263, up 2.1% over the past 24 hours.
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Bitcoin hinges on stablecoin
Technical and on-chain analyst Ali Martinez, who posts as Ali Charts, flagged on X a sharp contraction in exchange liquidity, thanks to dropping stablecoin reserves.
Stablecoin is a digital currency pegged to a stable asset, like the U.S. dollar, designed to avoid cryptocurrency’s notorious price volatility.
“Stablecoin reserves on exchanges have dropped by 5.18%, falling from $70.37 billion to roughly $66.37 billion over the past week” Ali wrote.
The decline of roughly $4 billion in a single week is significant because stablecoins parked on exchanges represent dry powder, i.e., capital sitting on the sidelines ready to be deployed into the market.
When that pool shrinks at the same time as prices, Ali explained that it means investors are pulling funds out of the crypto ecosystem altogether rather than rotating within it.
“Typically, when Bitcoin price and stablecoin reserves fall simultaneously, it signals a deleveraging event or capital flight,” Ali said.
His conclusion was direct.
“A market cannot sustain a macro breakout without deep liquidity on the sidelines. Until we see stablecoin reserves begin to replenish, the current push toward $80,000 remains structurally fragile.”
At press time, DefiLlama data showed the stablecoin market cap was standing at roughly $321.1 billion.
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Stablecoin legislation edges closer to the finish line
The stablecoin regulatory momentum is building in Washington.
Crypto-related stocks rallied sharply on May 4, led by Circle (NYSE: CRCL), the issuer of USDC stablecoin, which surged 20%. Coinbase (NASDAQ: COIN) climbed around 7%.
The catalyst was growing confidence that the Digital Asset Market Clarity Act, a long-debated bill to regulate U.S. crypto markets, is inching toward passage.
A compromise text released last week addressed one of the bill’s most contested provisions: whether stablecoin issuers can offer yield to holders.
Senators Thom Tillis (R-N.C.) and Angela Alsobrooks (D-Md.) reached an agreement that would bar issuers from paying interest simply for holding stablecoins. However, it will still permit rewards tied to genuine usage and transaction activity, broadly similar to how credit card rewards programs operate.
The rationale cited in the legislation is that stablecoin issuers offering bank-like interest could undermine depository institutions that are “integral to the strength of the American economy.”
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This story was originally published by TheStreet on May 4, 2026, where it first appeared in the MARKETS section. Add TheStreet as a Preferred Source by clicking here.
