There’s no denying that the current rally, which began mid-October and showed remarkable strength in early November, makes many analysts of the bitcoin market quite optimistic about a long bull run. Notable is that this crypto price recovery seems heavily focused on the majors such as BTC, with prices now surpassing those last seen before the bear market.
Stablecoins’ Role in Market Dynamics
Stablecoins have a similar role, traditionally surging in response to the creation of a bull market as traders inject large numbers of the coins into exchanges for entry or exit. Yet the current situation shows a reversal of this trend. According to DeFi Llama analysis, while the market has grown quite a bit, there hasn’t been much increase in stablecoins as yet.
According to the latest available figures, total market capitalization is $ 129.5 billion, down from a high of US $ 139 billion in December last year. This decline in the stablecoin market occurred at about the same time as last year’s Terra (UST) crash. With a convertible bearish market sentiment, trading volume fell and the amount of stablecoins needed was correspondingly reduced.
Insights from Analytics Firms
On the positive side, one of coinmarketcap.com’s contributing analysts points out that in just a few short weeks before the collapse of UST there was $ 188 billion circulating within this stablecoin market, which would represent decreases from peak values by as much as 31 %. What’s more, the total amount of stablecoins on exchange nonetheless far below last year.
Data from CryptoQuant shows that there is only US $ 16 billion still probably in the exchange system, a big decline on last year’s high of US $ 29.4billion worth of ERC-20 stablecoins held by exchanges alone. But traditionally, when stablecoin reserves increase dramatically this is viewed as an indication of a bullish market where buying pressure has increased.
Disclaimer: This article is for illustrative and informational purposes only. As for the high instability and risks involved in cryptocurrency trading, investors are welcome to investigate themselves.