On-chain data indicates that the supply of stablecoins has increased recently, a sign that Bitcoin could turn bullish.
Stablecoins have recently registered a surge in supply
As a CryptoQuant analyst pointed out directorSince late 2022, each increase in stablecoin supply has been accompanied by an increase in the price of Bitcoin. The metric of interest here is, of course, the total circulating supply of all stablecoins.
If the value of this indicator rises, it means that more tokens are being minted and therefore the capital is now in the stable. The decline, on the other hand, means that investors are exchanging these fiat-tethered tokens into currencies such as dollars or moving them into other cryptocurrencies such as Bitcoin.
In general, investors use stables whenever they want to avoid the volatility that comes with most coins in the sector. So whenever the supply of these tokens increases, it could be a sign that investors may be pulling out of a volatile market.
Such investors will simply trade their stablecoin for their desired coin when they finally feel the price is right to move back to other assets. Naturally, this could put bullish pressure on the price of the cryptocurrencies they are transitioning to.
Here is a graph showing trends in total stablecoin circulating supply over the past year and a half:
The value of the metric seems to have been going up in recent days | Source: CryptoQuant
As you can see in the graph above, when Bitcoin reached its bull market high, the overall stablecoin total circulating supply began to trend downward. Along with this downward trend, the value of BTC and other coins also fell, so the decreasing supply of these tokens implied an outflow of funds from the market.
However, in late 2022, the indicator finally showed a short deviation from its descending trajectory and recorded a sharp increase in its value. Interestingly, not long after this surge appeared, the price of Bitcoin began to see an increase.
This increase in stablecoin supply could be a sign that the market has been capitalized, and when these newly piled up stablecoins are converted into other coins, the market goes up. of fuel.
In March of this year, when the rally paused and bitcoin prices were falling, the indicator surged again, suggesting that investors may be withdrawing BTC into the stable room.
However, after bottoming out at $20,000, the stablecoin supply dwindled again, suggesting that holders may be swapping to Bitcoin. Unsurprisingly, asset prices saw a bullish boost from this as the rally resumed.
From the chart, we can see that the metric has recently risen again. Given that all such metric gains in recent months have been bullish for BTC, it’s possible that this new influx of capital will fuel the asset once again.
BTC price
As of this writing, Bitcoin is trading near $26,400, up 2% over the past week.
The value of the asset has gone up over the weekend | Source: BTCUSD on TradingView
Featured image from CoinWire Japan on Unsplash.com, charts from TradingView.com, CryptoQuant.com