Further Growth in Stablecoin Supply Could Signal a Return of On-Chain Liquidity

Quick take

Analysis of recent data highlights an intriguing trend: a return to growth in the supply of the five major stablecoins – USDT, USDC, BUSD, TUSD and DAI – after a period of contraction. Following the 2021 bull run, the overall supply of these stablecoins increased from a modest 25 billion to a staggering 162 billion as of February 2022. However, the trend has reversed and the supply has decreased, reflecting the slowdown of Bitcoin (BTC). in 2022. Currently, the combined supply of the top five stablecoins stands at around 120 billion.

For the first time since April 2022, the supply of these major stablecoins has started to swell again, with the inflection point occurring on October 19. Interestingly, this expansion coincided with a sharp rise in Bitcoin, suggesting a potential return of on-chain liquidity. after a prolonged bear market. This could provide Bitcoin with a much-needed buoy.

CryptoSlate’s recent observation further supports this notion: the influx of stablecoins into Bitcoin was a major catalyst propelling Bitcoin past the $30,000 mark in October. Therefore, tracking this growth trend in the stablecoin supply could be vital in forecasting Bitcoin market dynamics.

Obviously, USDT represents 70% of the market capitalization of the top five stablecoins, or 85 billion. Recently, CryptoSlate reported a reduction in the supply of two of them, BUSD and USDC. However, DAI presents a different story with its circulating supply of 5.3 billion, which appears to have bottomed out this year at around 4.4 billion. Meanwhile, TUSD has continued to see a strong rise, currently sitting at a solid 3.3 billion.

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