On-chain data shows that stablecoin supply has increased alongside bitcoin's latest breakout above $50,000, a sign that could be bullish for the market.
bitcoin and Stablecoin Market Caps Have Increased
According to data from the on-chain analysis firm Holy, the market capitalization of stablecoins has increased recently. “Stablecoin market capitalization” here refers to the combined supply of the six largest stablecoins in the cryptocurrency sector.
Please note that as all of these stablecoins are pegged to the USD (meaning their value stays around the $1 mark), the market cap and supply are interchangeable in your context as they would be the same (unlike , for example in the case of bitcoin, where they denote different things due to a fluctuating value in USD).
The following chart shows the trend of the market capitalization of stablecoins in recent months.
<img decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/02/Stablecoin-cap-soars-as-Bitcoin-gains-50000.jpeg" alt="bitcoin and Stablecoin Market Capitalization” width=”2688″ height=”1790″/>
Looks like the value of the metric has been on its way up in recent days | Source: Santiment on X
The chart shows that the supply of stablecoins has been increasing for some time now, suggesting that demand has been driving the issuance of more of these fiat-pegged tokens. Since the beginning of the year, the market capitalization of stables has increased by almost 5%, which is quite a significant value.
The analytics firm also included data in the same chart on the percentage of the stablecoin limit held by investors with at least $5 million in their wallets.
It seems that this metric has also seen a sharp increase in recent weeks, as these whales have added 2.32% of the supply of the six largest stables to their addresses.
Now, what do these trends in these stablecoin indicators mean for bitcoin and the sector in general? Its importance lies in why investors would choose to invest in stables.
These fiat-pegged tokens are generally used by traders to escape the volatility of currencies like btc. However, these investors only plan to exit temporarily; If they wanted to leave the cryptocurrency sector as a whole, they could have opted for fiat money.
When holders like these move into the stables, bitcoin and other prices naturally see a bearish effect. However, once these investors trade these assets again, prices feel buying pressure.
The stablecoin supply can be considered the available reserve of dry powder for bitcoin and others. The exchanges of these coins to the stables are not the only way this dry dust grows; However, new capital inflows directly into stablecoins also increase their market capitalization.
These new entries are totally bullish for the sector, since they are not made at the expense of the other currencies. Recently, the supply of stablecoins has grown, but at the same time, the price of bitcoin has also skyrocketed.
Given this simultaneous increase, it would appear that a net amount of fresh capital has entered both asset classes in this rally as if it were simply a rotation; one of the two could have taken the opposite path.
This combination is naturally the most bullish possible for the sector, as it means that not only has bitcoin's market capitalization increased, but it has also increased at the same time a dry powder that could potentially be implemented in the form of stablecoins.
btc Price
At the time of writing, bitcoin is trading at just under $50,000, rising over 16% in the last week.
<img loading="lazy" decoding="async" class="alignnone size-medium aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/02/Stablecoin-cap-soars-as-Bitcoin-gains-50000" alt="bitcoin price chart” width=”1534″ height=”854″/>
The price of the coin has sharply risen during the past day | Source: BTCUSD on TradingView
Featured image from Shutterstock.com, Santiment.net, TradingView.com charts
