Despite Bitcoin is remarkable 43% surge in the past year and Ether boasting a 38% increase, much capital remains dormant, according to key stablecoin metrics. However, this could soon change as BTC continues its upward momentum – paving the way for larger-scale investments into other crypto assets such as stablecoins.
Stablecoin Supply Declines Despite Bitcoin Doing Well
Notably, the availability of stablecoins – a major component for purchasing crypto assets – is declining. When more capital can be found to purchase cryptocurrencies, the supply of stablecoins rises; when it decreases, so does our access to these digital currencies.
Over the last several months, demand has been decreasing for the leading four stablecoins (USDT, USDC, BUSD, and DAI). As a point of contrast, from February to March 2022, we saw an influx of interest in digital assets, as demonstrated by the positive aggregate supply net position change. This marks a stark shift from what we currently observe today, with trends indicating further lowering since Feb 7th this year.
People Are Trying To Be Optimistic Towards Stablecoins Despite The Bad Trend
In addition, the Stablecoin Supply Ratio (SSR), a fundamental stablecoin metric that gauges Bitcoin’s market capitalization to that of all stablecoins, has increased. This signals a reduction in the purchasing power of stablecoins when compared to Bitcoin.
Despite the SSR suggesting a lack of demand for BTC, an alternate view is that capital is simply waiting to be invested soon. Although Bitcoin has been in negative territory for five out of seven days, daily trading volumes remain similar when compared to its twenty-day average. This could suggest that investors are merely biding their time before entering the market once more with confidence.
On certain occasions, BTC and ETH trading volume decreased below the 20-day average. Consequently, both cryptocurrencies have been gradually decreasing in price recently but with low to slightly above-average volumes. At this time, Bitcoin and ETH seem to stabilize near $23K and $1.6K, respectively, which will likely build investors’ confidence if they remain around these levels for an extended period. Monitoring the amount of stablecoins in circulation is not only a reflection of sentiment but also perhaps an indicator for prices to rise. If supply levels return to pre-2020 levels, it could be evidence that rates will climb too.
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