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Crypto’s 17-month dry spell ends with surging capital influx

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TL;DR

  • According to statistics recorded by blockchain analytics firm Glassnode, money is streaming into the crypto market through stablecoins or US dollar-pegged tokens for the first time in over a year.
  • The 90-day net change in the supply of the top four stablecoins—Tether (USDT), USD Coin (USDC), Binance USD (BUSD), and Dai (DAI)—has become noticeably positive.
  • The collapse of Terra Luna led to a negative view of Stablecoins in the market, and now it appears the tide has turned to favor the coins once more.

Crypto has been increasingly getting attention in the market as investors strive to increase their investment portfolios. The past 3 months have seen an active influx of capital inflow that has changed the supply of top stablecoins, which have recorded a positive flip, indicating a potential bull run for the digital market. 

Digital currencies have been known to be very volatile, and their price has been mostly influenced by macroeconomic events and other financial news. Among the top performers in the market include the major currencies like Bitcoin and Ethereum, with stablecoins like USD Coin and Binance USD, among others joining the list. 

Crypto market performance 

The crypto market had recently recorded an inflow of money through stablecoins, mostly the digital tokens pegged to the United States Dollar. This is a new record seen for the first time in over a year, based on the analysis from Glassnode, a blockchain analytics firm. 

The analysis records a 90-day change in net supply for the top four stablecoins. This includes digital assets like Tether (USDT), Dai (DAI), USD Coin (USDC), and Binance USD (BUSD). Their capital volume has turned on the positive side, and this has also been a fresh milestone not seen in the past 17 months from Terra’s collapse in mid-May 2022. 

Terra collapsed when the indicator turned to the downside in May last year for the first time when smart contracts LUNA tokens from Tera crashed. The token was mentioned to stabilize the UST, a blockchain algorithmic stablecoin. It crashed from $80 to just a few cents, setting the investors’ funds ablaze as billions in investments were lost. 

Moreover, in the months that followed, liquidity continued to leave the market, and the addition of other collapsed financial firms saw a loss in investor confidence in digital currencies. 

One of these fatal blows in crypto was the collapse of the famous crypto exchange firm led by Sam Bankman-Fried, FTX. Other crypto lenders have also left the market due to bankruptcy, including Celsius. 

Purchase of crypto has been mostly done through using stablecoins since 2020. As a result, this has caused an increase in stablecoin supply that has taken to predict a potential purchase pressure, a sign of dry powder investors are set to deploy in buying crypto assets. This is also a sign that margin derivatives trading may be employed. 

According to an email sent by Reflexivity Research to its subscribers on November 14, the firm explained:

 This week, the 90-day change in aggregated stablecoin supplies flipped positive for the first time in 1.5 years. This signals increased liquidity on-chain expressed through stablecoins and can be perceived as a sign of capital inflows.

Glassnode

Reasons behind the crypto surge

The major influence of this is the first-generation blockchain, Bitcoin, which has seen a surge in its price since October. Its price has doubled and topped to prices over $37,000 and is currently consolidating around $35,800, showcasing a potential bull rally based on expert predictions. Despite its price surge, Bitcoin is currently down by 2.95% in the past 24 hours but with an increased trading volume of 31.09%. 

The primary influence of the BTC price surge is the awaited exchange-traded funds (ETFs) approval by the United States Securities and Exchange Commission (SEC). The US regulator is currently in a grace period where almost all of the 12 pending ETFs might be approved between now and November 17. 

The SEC has also been laying the groundwork that has seen an attack on crypto adoption as it charged major players with allegations of selling crypto assets unregistered as securities. However, the crypto community has been resilient, and these major crypto players seek to dismiss charges placed against them, including XRP and Binance. 

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decision.

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Florence Muchai

Florence is a crypto enthusiast and writer who loves to travel. As a digital nomad, she explores the transformative power of blockchain technology. Her writing reflects the limitless possibilities for humanity to connect and grow.

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