Stablecoin Supply Continues to Rise

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The total supply of the three largest stablecoins (USDT, USDC, and DAI) has risen to $141.42 billion, reaching its highest level since May 2022. This data indicates that capital inflow into the cryptocurrency market continues, signaling the potential for a strong rally in Bitcoin (BTC) and altcoins.

Stablecoin Supply Growth Persists Despite Market Fluctuations

Bitcoin‘s recent rally slowed after peaking over $73,750 on March 14th. Despite the apparent loss of momentum in Bitcoin and altcoins, the steady increase in stablecoin supply shows that investor interest in the cryptocurrency market continues.

The cumulative supply of dominant stablecoins, representing over 90% of the stablecoin market, has increased by 2.1% this year, surpassing $20 billion. This growth, as highlighted by Reflexivity Research, indicates a positive trend for the cryptocurrency market and signals continued capital inflows. The rising trend in stablecoin supply signals strong demand for Bitcoin during market downturns, potentially paving the way for the start of a larger upward trend.

Stablecoins, particularly USDT, have become the primary tool for purchasing cryptocurrencies on the spot market and trading derivatives, which also supports the increase in market value. Investors have increasingly preferred stablecoin-margin futures over token-margin futures since the end of 2021, due to their linear return structures and stable collateral values, reducing the need for fixed risk hedging.

MVRV Z-Score Indicates Continued Upside for Bitcoin

In addition to the supply dynamics of stablecoins, other indicators such as Bitcoin’s market value to realized value (MVRV) Z-score also point to an upward trend for the largest cryptocurrency. The MVRV Z-score measures the deviation of Bitcoin’s market value from its realized value and serves as a proxy for fair value. With the Z-score currently at 2.87, well below the historical threshold for overbought conditions, Bitcoin appears far from reaching a peak level.

Historically, MVRV Z-scores below zero indicate market bottoms, while values above seven indicate market peaks. Since the current Z-score does not indicate either extreme, there appears to be room for further upside in Bitcoin’s price trajectory. These indicators reinforce the narrative that investors’ confidence in the cryptocurrency market continues despite short-term price fluctuations in Bitcoin.

Overall, the combination of positive indicators such as the increasing stablecoin supply and the bullish signals from the MVRV Z-score suggests the potential for a strong rally in the Bitcoin and altcoin markets.

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