An analyst has provided insights into how the ongoing Bitcoin correction phase may differ from the anticipated 2024 correction, referring to a significant on-chain metric: the stablecoin supply.
Stablecoin Supply Is Displaying A Different Pattern In This Bitcoin Downturn
In a recent CryptoQuant Quicktake post, one expert analyzed the latest trends in stablecoin circulation. “Stablecoins” are digital currencies designed to maintain a stable value by tracking fiat currencies, with the USD being the leading choice. They operate on various networks, though this discussion is focused on Ethereum-based stablecoins.
Stablecoins, by design, are relatively stable in value, leading investors to buy them to mitigate the risks associated with Bitcoin and other volatile assets. Typically, investors shift back to the more volatile cryptocurrencies when they believe market conditions are favorable. This strategic movement from stablecoins into Bitcoin creates upward buying pressure on the asset’s price.
Given their potential to act as collateral for purchasing volatile cryptocurrencies, the stablecoin supply can be viewed as an indicator of the available buying power in the market. An increase in this supply often signals a bullish sentiment.
The chart below, shared by the analyst, depicts the supply trend of ERC-20 stablecoins over the past 18 months:
The chart illustrates a significant increase in stablecoin supply over the last few months, suggesting a substantial influx of capital into these fiat-pegged tokens. This growth coincides with Bitcoin’s current bearish trend.
Interestingly, the analyst has also pointed out the stablecoin supply trend during Bitcoin’s bearish phase last year, where the supply moved sideways. This indicates that as Bitcoin faced corrections in 2024, a net outflow of capital from the sector occurred, funneling into stablecoins and leading to an increased stablecoin supply.
Conversely, the present scenario showcases a rotation of capital, suggesting that stablecoin holders are strategically waiting for optimal entry points into Bitcoin and other assets. However, this setup does not reflect a wholly bullish environment, especially since neither Bitcoin’s market capitalization nor stablecoin supply has risen concurrently.
Nevertheless, the stability maintained in the stablecoin supply during this market downturn could signal a glimmer of optimism for Bitcoin’s future.
BTC Price
In the ongoing fluctuations of the market, Bitcoin has encountered yet another recovery attempt, with prices currently hovering around $84,000 after briefly surpassing $87,000.
