The growth in market capitalization and circulating supply of stablecoin has been one of the best indicators for getting a general boost on how market participants are feeling during bullish and bearish times.
Monitoring the Tether (USDT) Treasury for large issues has been a common tactic used by analysts and traders to position themselves for a possible spike in the price of Bitcoin (BTC) and Altcoins.
A closer look at the data provided by CryptoQuant suggests that a seismic shift may be emerging in the composition of the stablecoin market as USDT issuance begins to stagnate as circulating supply from rivals such as USD Coin (USDC) is Upward trend over the last week.
Looking at the foreign exchange inflows and reserves of each individual stablecoin, there has actually been an increase in USDC deposited on the exchanges, while the amount of USDT has decreased, which has led to a plateau in the total stablecoin reserves held on the exchanges.
This is significant as Tether’s printing has been the catalyst for major market moves in the past, but its ongoing legal challenges and issues related to assets held in reserve have made holding the token a greater liability as regulators increasingly oppose it Adopt the wild west nature of the cryptocurrency market.
As can be seen in the graph above, the circulating supply of stablecoins rose steadily in the first five months of 2021 and accelerated somewhat when the market sold out in May, but the issue came to a standstill in early June as a reality that a downward trend had taken over the market.
May, when stablecoin supply peaked, the price of BTC briefly spiked to $ 40,000 before another wave of sales brought the price back below $ 34,000, crushing any building momentum.
Since then, stablecoin inflows to the exchanges have fallen to their lowest level since October 2020. The Crypto Fear and Greed Index also recorded “extreme fear”, which underpins the argument that there is a lack of demand from private and institutional investors.
Stablecoin inflows increase as BTC approaches $ 30,000
While the month of June had seen a dry spell of stablecoin deposits on the exchanges, the drought may have ended on June 21, as a drop in BTC price below $ 33,000 seems to have enticed stablecoin holders to take the dip to buy.
#Bitcoin some signs of life, stablecoin flows in.
Shh, don’t say anything, you’ll scare it off! pic.twitter.com/HrWtizpKJO
– Tempting Beef (@tempting_beef) June 21, 2021
Further evidence of USDC’s activity was provided by Whale Alert, a well-known Twitter bot that was launched on Jan.
76,672,444 #USDC (76,672,444 USD) minted at USDC Treasuryhttps: //t.co/v4OLyuuJE2
– Whale alert (@whale_alert) June 21, 2021
Typically, stablecoin inflows are viewed as bullish. A recent newsletter from CryptoQuant warned a word of caution as similar spikes in stablecoin issuance in the past were followed by prolonged sideways trading or price declines.
“After the bottom of the last bear market (2018-2019), we saw a steady increase in emissions events. At the peak (June 28, 2019) of this upswing, there was a major issuance event (the two major peaks in July-August 2019 are due to the USDT ETH issuance). It looks like the same thing is happening at the moment. “
Connected: Institutional sales of crypto hit longest streak since February 2018
This data serves as a warning that not every stablecoin issue is a predictor of an increase in Bitcoin price, as there are a number of factors that could be responsible for imprinting, such as institutional investors buying USDC for a future purchase , or even Altcoin and DeFi protocols preparing to integrate into USDC pairs.
In the long run, this shift has the potential to be beneficial to the crypto sector as audited projects like USDC are seen as more legitimate in the eyes of governments and regulators, but the sheer size of the USDT market cap of US $ 62.67 billion Dollar and its ubiquity on crypto exchanges means any attempt to deliver Tether is likely to cause pain in the market.
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