On-chain data shows that some indicators related to stablecoin supply have recently reached new all-time highs, a sign that could be bullish for Bitcoin.
Indicators related to stablecoin supply have recently continued their upward trend
As one analyst pointed out in a CryptoQuant Quicktake article, some indicators related to stablecoin supply have recently shown an increase. The indicators in question are the total stablecoin supply in circulation, the Tether (USDT) supply, and the total stablecoin exchange reserve on Binance.
Note that these indicators only include data from ERC20 versions of stablecoins. Below is the graph of the metrics shared by the quant.
All of these indicators appear to have been on the rise in recent days | Source: CryptoQuant
The chart shows that all three indicators have recently moved higher and set new records, so it seems that demand for stablecoins has been high among investors.
While they may not seem like a big deal at first, stablecoins have always been very relevant to the broader market. At their core, stablecoins serve as a sort of safe haven for investors to store their capital, protected from the volatility of Bitcoin and other assets.
However, holders who conserve their capital in this manner may be considering venturing into the volatile side, as they would have instead chosen fiat currency if their goal was to stay out of the market in the long term.
Naturally, when investors make this shift to cryptocurrencies like Bitcoin, they drive up their prices. Because of the potential for deployment on the volatile side, the stablecoin offering is often considered the “dry powder” available in the market.
So, whenever the supply of these stablecoins increases, it can be a bullish sign for Bitcoin and other cryptocurrencies, as it suggests that there is now more capital waiting to be invested.
The recent increase in stablecoin supply may be particularly positive, as it is accompanied by an upward trajectory of BTC itself, which the quant highlighted in the chart.
Sometimes the supply of these tokens linked to fiat currency increases due to capital outflows from volatile coins. In these situations, although the stable increase in supply is bullish, it does not have much meaning on the net, since the prices of the assets from which said capital comes fall during the exchange.
Given that Bitcoin has recently surged instead of stablecoin supply reaching new highs, capital must be coming from elsewhere, such as outside the sector itself, indicating net capital inflows.
When investors want to buy BTC and other tokens using their stablecoins, they can use exchanges. As mentioned earlier, one of the indicators on the chart is the stablecoins present on Binance, so its value can highlight the demand present among exchange holders in the near future.
As this indicator has also been increasing recently, many investors are actively looking to buy Bitcoin now rather than holding their capital for future opportunities.
BTC Price
At the time of writing, Bitcoin is hovering around $63,800, up nearly 10% from last week.
Looks like the price of BTC has been consolidating since its recent surge | Source: BTCUSD on TradingView
Featured image by Dall-E, CryptoQuant.com, chart by TradingView.com
