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With the risk-off tendencies rapidly rising in financial markets, technical and on-chain signals appear here and there, suggesting that both good and bad things could happen to the industry in the upcoming days or even weeks. Here is the signal highlighted by Bloomberg that might be considered the main sign of a downtrend on the market.
Stablecoin capitalization is a commonly used metric that tracks the total volume of funds entering and leaving a class of assets. According to the provided data, it currently stays at approximately $180 billion, up from $38 billion only a year ago.
The long-term rise in the capitalization of stablecoins is not suggesting any abnormal or negative activity on the market, but the short-term spike in inflows to stablecoins could reflect fundamental issues on the market as more traders and investors move their funds to stable solutions rather than betting on risky assets like Bitcoin and altcoins.
It is important to note that the popularity of stablecoins has risen due to the development of borrowing and lending solutions that allow users to receive stable income thanks to DeFi platforms.
But whenever the crypto market capitalization shrinks and the stablecoin supply rises or remains the same, it most likely suggests that the majority of players on the market moved their funds into stable solutions to avoid additional losses. The same trend is being observed now as the biggest stablecoin on the market, Tether, faced a $3 billion market capitalization increase in the last six days.
At press time, the total market capitalization of the cryptocurrency market remains at $1.7 trillion, with a $100 billion increase since yesterday's crypto market sell-off.