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Currently, it is evident that stablecoins can purchase 15-times as much Bitcoin as in early 2018. That fact might bode well for the next bull run when and if it happens. The existing stablecoins have never had more buying power than now. That might bode well for the next bitcoin bull run.
Glassnode strives to ensure that it keeps track of the Stablecoin Supply Ratio, or SSR. The ratio is calculated by dividing Bitcoin’s (BTC) market capitalization by the market capitalization of all the major stablecoins. A low SSR indicates that the stablecoins have more buying power which the company asserts could be interpreted as a bullish sign.
SSR = BTC Market Cap / Stablecoin Market Cap
Currently, this ratio stands at just above 15. It means that, in theory, stablecoins could purchase almost a fifteenth of all Bitcoin. Putting that into context, back in March 2018, the ratio stood at 88. Therefore, in just over two years the stablecoin buying power increased by more than sixfold.
Bitcoin Stagnation And The Rise Of Stablecoins
Since the ratio has two components, which is to ‘blame’ for the drastic change? It becomes quite clear that the radical change is likely due to the growth of the stablecoins looking at the charts.
The market capitalization of BTC at the time was $195 billion, but currently, it stands at $171 billion. That represents a decrease of 12%. In the meantime, the capitalization for the stablecoins has increased from $2.2 billion to $11 billion or 500% growth.
Stablecoins represent a convenience vehicle for traders and investors. This sector allows investors to park their crypto assets in stable assets without having to cash out and exit the cryptocurrency space. A recent study discovered that the exchanges that support BTC-USDT pairs record more ‘whale’ trades than the ones that support BTC-USD pairs.
Correlation Insight
Even though the market capitalization of the stablecoins has been increasing sharply, the bitcoin price has not kept up with that pace. The correlation between the SSR and the BTC price seems to have broken down around Black Thursday.
Whether the growth of stablecoins will transform into the next bull run remains an issue to be seen. Nevertheless, if and when that run happens, the maturity of the stablecoin arena should offer more effective and efficient mechanisms for the market participants.