The 90-day net change in the supply of the top four stablecoins – Tether (USDT), USD Coin (USDC), Binance USD (BUSD), and Dai (DAI) – has turned noticeably positive. This marks the first instance of such positivity since the collapse of Terra in mid-May 2022.
Stablecoins have been widely used for funding cryptocurrency purchases since 2020. An increase in stablecoin supply is interpreted as potential buying pressure or available funds that investors may use to buy cryptocurrencies or employ as margin in derivatives trading.
Reflexivity Research commented in an email to subscribers on Nov. 14, “This week, the 90-day change in aggregated stablecoin supplies flipped positive for the first time in 1.5 years. This signals increased liquidity on-chain expressed through stablecoins and can be perceived as a sign of capital inflows.”
This positive trend coincides with Bitcoin (BTC) doubling in value to over $35,000 this year, with expectations of U.S. regulators approving a cryptocurrency exchange-traded fund (ETF) being a key driver.
The indicator of stablecoin supply had turned negative in the first half of May 2022, following the collapse of Terra’s LUNA token, leading to a loss of billions in investor wealth. Subsequent months saw continued liquidity leaving the market due to the bankruptcy of multiple funds, crypto lenders, and issues at the FTX exchange, which undermined investor confidence.
