On-chain Stablecoin Analysis – Buying power is strong, but BTC price is falling, what is going on?

May 31, 2022 - Around 7 mins mins to read

In addition to the on-chain indexes of Bitcoin and ETH, the on-chain indexes of stablecoins are also very important indicators. Stablecoins represent cash in the Crypto market. So evaluating stablecoin on-chain indicators shows us whether the current cash flow is ready to enter the next market.
In this essay, I’ll look at and anticipate cash flow for stablecoins using on-chain statistics to determine if the market can keep growing shortly.

Total Stablecoin Supply

Stablecoin is a cryptocurrency designed to minimize the impact of price volatility by fixing it to a more stable asset such as fiat money, commodities (gold, silver…), or maybe another cryptocurrency.

According to The Block, the total supply of stablecoins on the market as of May 25, 2022, is around $155 billion. Approximately 14.8% off the ATH on Apr 4, 2022 of $182B. The recent compound annual growth rate (CAGR) for the past four years (2018-2022) is 246.1%.

With a CAGR of 246.1%, it is projected that the total supply of stablecoin in the crypto market could reach $407 billion in 2023 and $1 trillion in 2024.

At the end of 2018, USDT was the most dominant stablecoin in the market, accounting for 80% of the total stablecoin supply in the entire market. But from 2021 to 2022, the dominance of USDT has been gradually reduced, and the market share began to be divided equally among other stablecoins in the market such as USDC, BUSD, and DAI,…

The three stablecoins with the largest market share at the moment are USDT with 49.73%, USDC at 29.34%, and BUSD at 11.8%. Although the USDT market share has decreased quite a bit from 2018 until now, USDT is still the largest stablecoin by market capitalization with $77.1 billion and accounts for nearly 50% of the stablecoin market share of the entire market.

Data From Exchanges

Balance stablecoin on exchanges

The stablecoin balance on all exchanges is a metric that tells us how much cash is in the wallets of investors on exchanges that are ready to buy bitcoin or altcoins on the market instantly. This statistic includes stablecoins such as BUSD, GUSD, HSUD, DAI, USDP, EURS, SAI, sUSD, USDT, USDC….

This number of stablecoins is concentrated mainly on exchanges such as Binance, Huobi, Okex, Coinbase, FTX. In which, Binance accounts for the largest number of stablecoins with more than $ 17 billion.

The number of stablecoins deposited on exchanges has increased continuously in the past year. Specifically, most recently, the number of Stablecoins on exchanges has increased by more than 17% from $28.3 billion (May 11) to $35 billion (May 16). This is the time when BTC has had the sharpest and deepest drop in more than a year when the price has touched down to $27K.

In May 5 2021 BTC also had a drop to $ 30K, but the number of stablecoins listed on the exchange at this time only increased by 10%.

The sharp rise of stablecoins shows that investors have put money on exchanges in preparation for buying Bitcoin and Altcoins at any time. This is a positive sign that favors continued growth of the market.

USDT and BUSD have been the biggest contributors to the increase in the amount of stablecoins deposited on the exchange in the last two weeks.

Stablecoin exchanges netflow

In general, in the past 2 weeks, there has been a large number of stablecoins net-loaded on the exchange.

Especially on May 12th, there are over $2.5 billion of stablecoins net deposited on the exchange. This is the largest amount of stablecoins deposited on the exchange in just one day since a year ago. This shows signs that the whales have transferred a large amount of money to the exchange in preparation to buy crypto.

Balance of each type of stablecoin

USDT

The amount of USDT placed on the exchange surged by about 69% from $6.9 billion to $11.7 billion between May 11 and 16. USDT lost its peg on May 11 and plummeted to $0.995. Investors may have taken advantage of the low-cost opportunity to purchase USDT and sell it on the market.

BUSD

BUSD now has a total supply of $17.5 billion, which is around $6.5 billion greater than USDT. BUSD is now the stablecoin offered on the most exchanges, despite its market capitalization of only 11.8%.

USDC

USDC is the polar opposite of the USDT and BUSD. USDC has been continuously removed from the wallet from the beginning of April. Currently, the total amount of USDC traded on exchanges is only around $4.4 billion. USDC It is $6.6 billion less than it was USDT, and less than BUSD of $13.1 billion.

The above on-chain metrics give us three notable signs.

The first is that there is a large amount of stablecoins available on the exchange to buy Bitcoin or Altcoin at any time.
Second, the majority of current stablecoins are being held on Binance and are held in the form of BUSD.
And finally, there is an amount of USDT that has not been deposited on the exchange, and it is possible that in the near future the amount of USDT will be loaded on the exchange and purchased Bitcoin at any time.

USDT Dominance

USDT Dominance represents the dominance of USDT’s total market capitalization. The larger the USDT.D, the more stablecoins are available in the market. This helps us forecast a recovery will soon happen.

“The recovery will happen soon” does not mean that this index’s high will be good for the market. Specifically.

In the past, USDT.D fluctuated in the range of 2%-5%. That is, every time the amount of stablecoins on the market reaches 5% of the total capitalization, investors tend to use USDT to buy Crypto. Typically those are the two most recent Bitcoin bulls in October 2020 and August 2021. USDT.D has dropped from 5% to about 2%-2.5%

However, in the beginning of 2022 so far, USDT.D has increased continuously and surpassed the 5% area considered as its resistance area and has not shown any signs of correction yet. Therefore, it is difficult to predict how far the Bitcoin price will fall and when the market will recover.

Stablecoin Supply Ratio (SSR)

Another on-chain stablecoin metric we need to look at is the Stablecoin supply ratio (SRR). SRR represents the buying power of the current market. When this index is negative, it means that the buying power of BTC in the market is very large and the price of BTC can increase at any time and vice versa.

In the past, when the SSR index fell between -4 and -2, it would bottom and trend up, and the bitcoin price would follow suit. Specifically, on Mar 5, 2020 SRR reached -3.9 and on May 23, 2021, SRR reached -2.5. Immediately after that, the market recovered and grew strongly.

Currently, this index is at -1.26, showing that the market is currently having pretty good buying power and that the market can recover at any time.

Verdict

So, after looking at the on-chain indicators of stablecoins, I’ve reached to the following conclusions:

The market capitalization of stablecoins is now developing rapidly as more and more stablecoins are released on the market, indicating the industry’s development and increased investor demand for market participation.
On exchanges, stablecoin holdings are massive, and the SRR is similarly low. Demonstrate that the market’s present BTC buying power is extremely high, and that the market can grow at any time.

Overall, the on-chain indicators for stablecoins are very good and tell us that there is an amount of money available to buy crypto and push the bull market back up.
However, just a few of the above adjustments will not fully reflect the market. Due to the unstable economic situation, Interest rates may continue to rise, monetary policy tightening by the Fed and other banks globally amid high inflation, along with a lot of negative news. The market polarization has put pressure on most of the financial markets in general and the cryptocurrency market in particular. That’s why most of the investors are still in observation mode, haven’t made any big buy orders yet. Therefore, BTC Price still shows no signs of growth and trading volume is very low at the moment.

If you have any questions, comments, suggestions, or ideas about the project, please email ventures@coincu.com.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

Ken. N.

Coincu Ventures

Analysis, DeFi

On-chain Stablecoin Analysis – Buying power is strong, but BTC price is falling, what is going on?

Total Stablecoin Supply

With a CAGR of 246.1%, it is projected that the total supply of stablecoin in the crypto market could reach $407 billion in 2023 and $1 trillion in 2024.