The supply of the top four stablecoins has changed over the past 90 days in a positive manner, signifying an influx of capital into the market.
For the first time in more than a year, funds are entering the cryptocurrency market through stablecoins or US dollar-pegged tokens, according to data compiled by blockchain analytics company Glassnode.
The supply of the top four stablecoins, tether (USDT), USD Coin (USDC), Binance USD (BUSD), and Dai (DAI), has changed net over the last 90 days in a notably positive way. This is the first time this has happened since Terra’s collapse in mid-May 2022.
Stablecoins have been a popular way to pay for cryptocurrency purchases since 2020. As a result, an increase in stablecoin supply is interpreted as possible purchasing pressure or dry powder that investors might utilize to acquire cryptocurrency or leverage when trading derivatives.
For the first time in 1.5 years, the 90-day trend in the total stablecoin supply turned positive this week. In an email to readers on November 14, Reflexivity Research stated, “This signals increased liquidity on-chain expressed through stablecoins and can be perceived as a sign of capital inflows.”
The shift occurs as the price of bitcoin (BTC) has more than quadrupled to over $35,000 this year. The majority of the gains have been attributed to the assumption that an exchange-traded fund that invests in cryptocurrencies will soon be approved by US regulators.
The smart contract blockchain Terra’s LUNA token, intended to stabilize the blockchain’s algorithmic stablecoin UST, plummeted from $80 to a few cents during the first half of May 2022, causing billions in investor capital to be lost. This is when the signal turned negative.
In the months that followed, liquidity kept leaving the market as investor confidence was damaged by the bankruptcies of several funds, cryptocurrency lenders, and FTX exchange.