This Metric Hinted At The Bitcoin Retrace In Advance
September 01 2023 - 3:00PM
NEWSBTC
The trend in the total supply of the stablecoins may have hinted in
advance that the Bitcoin rally wouldn’t last too long. Bitcoin
Stablecoins Supply Hasn’t Moved Much Recently An analyst in a
CryptoQuant Quicktake post explained that the latest news has been
unable to make the stablecoins supply budge. The “stablecoins
supply” here refers to the total circulating supply of all
stablecoins in the sector. Generally, investors use stables to
escape the volatility associated with most coins in the rest of the
cryptocurrency sector. Thus, whenever this metric rises, new tokens
of the stablecoins are being minted because there is a demand for
converting to them from the other assets or fresh demand is coming
into the market. Such investors who seek safety in these fiat-tied
tokens usually do so because they don’t want to exit the
cryptocurrency sector completely; they only require a temporary
place to station their capital. When these holders eventually find
that the prices are right to jump back into the volatile coins like
Bitcoin, they swap their stablecoins into them, thus putting buying
pressure on their prices. Related Reading: Bitcoin Plunges To
$26,000 As Miners Sell Big Now, here is a chart that shows the
trend in the stablecoins supply over the past year: The value of
the metric seems to have been heading down in recent days | Source:
CryptoQuant In the graph, the quant has marked a specific
correlation between the Bitcoin spot price and the stablecoin
supply. It would appear that all the major increases in the former
during the past year have come following rises in the latter
metric. There are three instances of this trend in this period: the
first formed before the January rally, the second before the March
rebound, and the third before the June surge. Related Reading:
Here’s What Bitcoin Price The Bull Market Will Start According To
This Analyst From the chart, it’s apparent that the price increase
in the asset wasn’t caused by the increases in the supply of the
stables but rather the decline in them that followed afterward. The
increases in the supply of the stablecoins likely occurred because
of fresh capital injections. When this new capital was deployed
into Bitcoin and the others (when the indicator declined), the
assets obtained the fuel for their rallies. With the most recent
rally in the asset instigated by the news of Grayscale’s victory
against the US SEC, there was no such pattern in the supply of
these fiat-tied assets. This may have been one of the early signs
that the rally wasn’t backed by constructive market growth, as the
stablecoins supply has only been moving sideways. The Bitcoin
retrace below the $26,000 level may have only been a natural
consequence of this weak structure. BTC Price Bitcoin had earlier
fully retraced the gains of the Grayscale rally, but it would
appear that the decline isn’t over just yet, as the asset has now
gone below the $26,000 level it had been at before the surge. BTC
has plunged during the past couple of days | Source: BTCUSD on
TradingView Featured image from iStock.com, charts from
TradingView.com, CryptoQuant.com
USD Coin (COIN:USDCUSD)
Historical Stock Chart
From Jul 2024 to Aug 2024
USD Coin (COIN:USDCUSD)
Historical Stock Chart
From Aug 2023 to Aug 2024