On-chain data shows that stablecoins recorded inflows of more than $4 billion last month. This is why this may be relevant to Bitcoin.
The market cap of stablecoins has enjoyed some notable growth recently
According to data from the on-chain analytics company GlassnodeThe total supply of stablecoins has been expanding since October last year.
The relevant indicator here is the “Net Change of Aggregate Market Cap Position”, which tracks the monthly changes that occur in the total supply of stablecoins (or market capitalization, as it is equivalent in the case of these assets linked to the US dollar).
When the value of this measure is positive, it means that the supply of stables has increased over the past 30 days. On the other hand, negative values indicate a decrease in this space.
Glassnode has included only major stablecoins in the data for this index. To be more specific, Tether (USDT), USD Coin (USDC), Binance USD (BUSD), Dai (DAI), and TrueUSD (TUSD) are the assets of interest.
Now, here is a chart showing the trend in the net change in the combined market capitalization position of these stablecoins over the past few years:
The value of the metric appears to have been green in recent weeks | Source: Glassnode on X
As shown in the chart above, the market cap of stablecoins has enjoyed net inflows over the past two months, as the net change in position has been positive.
The 30-day net position change recently reached $4.17 billion, indicating that the market capitalization of these stables has just seen its largest increase since March 2022. Following these recent inflows, these staked tokens now make up for a total market value of around $128 billion. .
Now, what does this increase mean for the broader cryptocurrency sector? In general, there can be two reasons behind the high supply of stablecoins. The first is capital turnover from Bitcoin and other assets.
When investors want to escape the volatility associated with these other coins in the market, they may look for a safe haven in these stables, which are only as volatile as the US dollar. Therefore, selling holders of these coins to stables can lead to an increase in their supply.
The other reason behind the rise in the market value of these assets is of course the influx of new capital. The first factor can be bearish for other asset prices, at least in the short term, but the latter reason is almost always a bullish development.
However, the recent spike in stablecoin net position change came with a decline in Bitcoin, which could mean that while some new capital may be coming in, there certainly appears to be a rotation from Bitcoin and others.
In either case, though, the long-term consequences of a high supply of stablecoins should remain bullish, as capital locked into these typically pegged fiat currencies tends to find its way back to the volatile side once investors feel the time is right. To buy. Bitcoin and others.
Bitcoin price
Bitcoin has seen a decline over the past day, with the coin briefly falling towards $40,700 million but has since made some recovery to $41,400.
Looks like the price of the coin has plunged recently | Source: BTCUSD on TradingView
Featured image from CoinWire Japan on Unsplash.com, charts from TradingView.com and Glassnode.com