Exciting Development in the Crypto Market: First Net Capital Inflow in 17 Months

We are here with an attention-grabbing development in the cryptocurrency market. For the first time in 17 months, there is a net capital inflow that is creating excitement in the crypto market. On the other hand, there are also positive changes in the supply of the top four stablecoins over a 90-day period. Let’s take a look at the details.

Positive Developments as a Sign of the Bitcoin and Altcoin Rally

Blockchain analytics firm Glassnode states that stablecoins such as Tether (USDT), USD Coin (USDC), Binance USD (BUSD), and Dai (DAI) have shown an increase in supply. Glassnode also emphasizes that this indicates potential buying pressure and increased liquidity. This development carries significant meaning as it signals a notable reversal since the Terra crash in mid-May 2022.

The shift to positive net changes in the total supply of leading stablecoins indicates a capital inflow into the crypto market. Stablecoins have become an important tool for cryptocurrency purchases since 2020. An increase in their supply typically means increased purchasing power or funding for use in derivative trading.

Sign of Increased Liquidity

Reflexivity Research highlights the importance of this development in an email sent to subscribers on November 14th:

“This week, the 90-day change in the total stablecoin supply turned positive for the first time in 1.5 years. This indicates an increase in liquidity on the chain expressed through stablecoins. On the other hand, this development can also be perceived as a sign of capital inflows.”

The recent increase in stablecoin supply coincides with Bitcoin‘s exceptional performance this year, doubling its value and surpassing $35,000. The majority of Bitcoin’s gains are attributed to expectations of US regulatory approval for a cryptocurrency exchange-traded fund (ETF). The positive stablecoin trend indicates that investors may be preparing to take advantage of these funds for cryptocurrency purchases or margin trading.

Market Dynamics Following the Terra Crash

The indicator of stablecoin supply turned negative in May 2022 after the crash of Terra’s LUNA token associated with the algorithmic stablecoin UST. This event, combined with subsequent challenges such as fund bankruptcies, issues with companies providing crypto loans, and problems on the FTX exchange, led to a prolonged period of capital outflows and decreased investor confidence.

As this significant turnaround occurs in the market, analysts and participants closely monitor how the positive stablecoin trend will shape the dynamics of the cryptocurrency world in the coming weeks. This development is seen as a sign of a rally as expectations turn positive.