Journalist
Posted:
- The stablecoin statistics indicated a robust crypto market and increasing confidence in it.
- The dominance chart showed that the altcoin run was not over yet.
The crypto market capitalization has been rising since late September. It was around that time that Bitcoin [BTC] found demand at the $26k level and started moving higher. This created confidence throughout the market.
AMBCrypto looked at some relevant stablecoin metrics and found that they reflected investor confidence. Could this winning streak continue into the new year?
The stablecoin market is showing a rise in usage and adoption
Some on-chain metrics for the stablecoin market are exchange rate reserve, inflows, circulating supply, and active addresses. AMBCrypto noted that the circulating supply of ERC20 stablecoins has surged higher over the past month.
The last time this happened was in February/March 2023. In the intervening period, supply has shown a downward trend. This could be due to several factors.
For example, stablecoins can be deployed to earn rewards during times of market uncertainty or in the absence of a strong uptrend.
They can also be locked into DeFi platforms for lending or yield farming, or users can hold their stablecoin in reserve for a big price drop before entering the markets.
Source: CryptoQuant
The increase in circulating supply since mid-November suggested that more stablecoins are being used in daily transactions, or in trading and speculation activities.
This indicated increased usage, which is generally a positive outcome.
The speculation is an indication that market participants have more confidence in crypto assets. A look at the rising Open Interest of Bitcoin, or many other assets, shows strong bullish market sentiment over the past few weeks.
The number of active addresses has also increased since the end of September. The 7-day Simple Moving Average showed this more clearly. The upward trend in supply and unique active addresses indicated greater market activity and adoption.
Source: CryptoQuant
In addition, foreign exchange inflows have also increased since mid-October. It was a sign of increasing buying pressure in the crypto market as an influx of stablecoins to exchanges provides easy liquidity.
Source: CryptoQuant
All factors examined so far point to the bullishness of the market. In retrospect this is clear. However, stablecoin exchange inflows saw a sharp decline after December 17, while other metrics continued to rise.
Does this mean that buying pressure is starting to dry up?
Technical analysis of stablecoin dominance could reveal more
Tether [USDT] is the most popular stablecoin, at least in terms of market capitalization. According to CoinMarketCapUSDT’s 24-hour volume is almost 12 times higher than that of the next stablecoin on the list, USD Coin [USDC].
Therefore, the USDT dominance chart can serve well as an indication of the performance of stablecoins, and what the coming months could have in store.
Source: USDT Dominance, TradingView
USDT dominance was in a strong downtrend. It has fallen from 8% on October 16 to 5.62% at the time of writing. Moreover, the 5.79% level, which was a support level almost eighteen months ago, has turned into resistance.
In the south, the next long-term support is at 4.9%. It is unclear how much can be added to the cryptocurrency market capitalization. However, altcoin investors may plan to book profits if USDT’s dominance challenges the 4.9% level.
Read Bitcoin’s [BTC] Price forecast 2023-24
It may take approximately 4 to 8 weeks for this to be achieved.
After that, Bitcoin’s reaction and market sentiment would be key to understanding where the altcoin market is headed. A lower timeframe analysis of the dominance graph at that time could provide some relevant answers.