Stablecoin Supply Has Bottomed—Is It Bullish For Crypto?

Prominent crypto talking heads are calling it: There's only one way things can go now.

Nick Carter tweeted: “The supply of fixtures has dropped to the bottom and I believe it will only go from here.

After the fall of most of 2023, the general supply of all A stable coin It seems to have stopped. but why?

Instead of withdrawing their digital dollars from the market (and buying real dollars), Stablecoin holders are doing the opposite.

“We're seeing inflows for the first time in two years,” wrote Twitter user Pentoshi.

This, as crypto bulls would have you believe, is a good sign. It means that a lot of dry flour is being prepared for plowing. Bitcoin Or your favorite altcoin.

This is because it is easier and faster to get your money into the crypto rail early by slowly building up a position before some mega rally.

Conor Ryder, head of research at Etena Labs, told Decrypt: “This is a fairly reliable indicator of sentiment as it tracks how much new capital is coming into the system. “Since most stablecoins currently pay zero yield, it is safe to assume that investors will target transactions and generate stablecoins, just like they would buy other crypto assets.”

Still, the narrative is coated with some serious grains of salt (like many cryptos).

“I think there's too much to be directly relevant,” Ashwat Balakrishnan, head of Delphi Digital Research, told Decrypt. It's not always easy as USDC is being considered so demand for Bitcoin is coming.

The data is also unclear. While the decline of all stablecoins seems to have slowed some, the slowdown has not been evenly distributed.

For example, Circle's USDC continued to decline from a high of $56 billion to $24 billion today, while Tether's USDT hit a market high of $85 billion this week.

By the way, USDC falling further behind USDT is more indicative of the market exiting the United States, Athena Labs Ryder told Decrypt.

If not to pick up wallets, why would the stable coin supply be resurrected?

Those dollar coins could enter the mainstream market, Balakrishnan said. “Many deals are now done in stablecoins. A lot is happening in USDT and USDC right now.

Basically, instead of funding rounds for small crypto projects and DAOs being done in cross-border wires, they are now being done in stablecoins. It's not exactly exciting for the space yet, but it does provide an alternative to Twitterati influencers introducing new hopium into the market.

Stablecoin supply isn't the only metric to look at either. Garrett Jones, co-founder of Bluechip, a non-profit stablecoin rating firm, told Decrypt that we need to keep a close eye on transaction volumes.

“Stablecoin supply can tell us a lot,” he told Decrypt.

Ultimately, it is a unique metric to determine the health of the market. Or at least one you shouldn't bet on the house.