A stablecoin is a cryptocurrency that locks its value into a reference asset, including fiat currency, commodities, or other cryptocurrencies.
They form an integral part of the crypto ecosystem by providing price stability in volatile markets. In cycles in and out of stablecoins, users provide liquidity and exit positions.
This cyclical relationship between Bitcoin and stablecoins can provide insight into market sentiment and indicate periods of buying and selling pressure.
Data from Glassnode and analyzed by CryptoSlate show a perfect storm of building potential buying pressure. However, macro uncertainty continues to weigh heavily.
Bitcoin: Stablecoin Supply Ratio
The Stablecoin Supply Rate (SSR) is calculated by dividing the Bitcoin market cap by the market cap of all stablecoins. Comparing the market caps of Bitcoin and stablecoins, the SSR can be seen as a measure of strength between the two.
A high SSR indicates low potential buying pressure and is considered bearish. In contrast, a low SSR means high potential buying pressure, making the situation bullish.
The chart below shows the SSR in a macro downtrend since early 2018, with a significant drop since July 2021 and a further drop into 2022.
The current reading of 2.28 indicates that there is $2.28 in Bitcoin for every $1 in stablecoin. This is a situation of high potential buying pressure for Bitcoin.
Stablecoin: Exchange Balance
Stablecoins: Balance on Exchange (SBoE) looks at the total number of stablecoins held on exchanges. The rise in SBoE is seen as bullish, indicating continued accumulation of sidelined liquidity ready to strike.
SBoE has been on an upward trend since January of this year and has now peaked at around $46 billion.
Given the macro uncertainty, the marginalized liquidity could be waiting for a bottom in legacy markets before circulating to Bitcoin and other cryptocurrencies.
Stablecoin: Exchange Net Flow Volume
Stablecoin: Exchange Net Flow Volume shows the daily net movement of stablecoins in and out of the top four stablecoin exchanges. They are USDT, USDC, BUSD, and DAI, but the data only contains movements via the Ethereum blockchain.
A positive net flow (green) indicates an inflow of stablecoins to exchanges, increasing retained supply. Negative net flow (red) is when the exchange experiences overall outflow.
The chart below shows that current inflows are over $1 billion, which is the 7th highest inflow ever recorded, and traders will see it as soon as favorable market conditions arise. We are further confirming that we are ready to rush to.