May 23, 2024
Analyst: Stablecoin Growth Trumps Bitcoin ETF Inflows as Key Indicator of Crypto Bull Market
Bitcoin ETF

Analyst: Stablecoin Growth Trumps Bitcoin ETF Inflows as Key Indicator of Crypto Bull Market

As demand for spot bitcoin ETFs captures the attention of crypto market observers, a new report from 10x Research suggests that monitoring stablecoin supply may provide a more accurate indicator of digital asset price trends.

According to the report released on Monday, the rapid expansion of stablecoin supply indicates a positive trajectory for crypto prices.

Markus Thielen, founder of 10x Research, emphasized the growing influence of stablecoin issuers in driving market momentum.

Thielen stated, “Stablecoin issuers are the new sheriff in town, driving this market higher,” highlighting the pivotal role these entities play in shaping market dynamics.

Understanding Stablecoins’ Significance

Stablecoins, digital assets pegged to traditional fiat currencies like the U.S. dollar, serve as a crucial link between fiat and digital assets, providing liquidity for trading activities.

Changes in stablecoin supply serve as a vital indicator of market health, as participants create stablecoins by depositing fiat money, as outlined in the 10x report.

Over the past 30 days, the supply of major stablecoins such as Tether’s USDT and Circle’s USDC has surged by nearly $10 billion combined, according to 10x Research.

Additionally, the supply of other leading stablecoins like MakerDAO’s DAI and First Digital’s FDUSD has expanded by 5%-10% during the same period, based on CoinGecko data.

Record-Breaking Expansion of USDT

USDT alone witnessed a staggering growth of $2.4 billion within a week, marking one of the highest 7-day increases during the current bull market, the report highlighted.

Thielen noted, “Fiat money is being moved into crypto at an accelerated pace,” underscoring the significant inflows into the crypto market driven by stablecoin expansion.

Despite U.S.-based spot bitcoin ETFs attracting $5 billion in net inflows over the past month, Thielen pointed out that stablecoin minting has surpassed ETF activity.

He highlighted that stablecoin minting may represent long-only exposure, contrasting with ETF inflows potentially influenced by market participants engaging in yield harvesting strategies.

Insights into Funding Rates and Hedge Fund Activity

The report also delves into the relationship between funding rates and hedge fund behaviour, noting that elevated futures funding rates present lucrative opportunities for savvy investors.

Hedge funds have notably maintained record amounts of bitcoin futures short positions on regulated exchanges like the Chicago Mercantile Exchange, potentially driven by demand for carry trade strategies.

As the crypto market continues to evolve, the surge in stablecoin supply emerges as a key factor driving market sentiment and price dynamics.

While ETFs attract attention, stablecoin issuers wield significant influence over market movements, signalling a bullish outlook for digital assets amid heightened demand and evolving trading strategies.


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