This Bitcoin Adjustment Is Different From March 2024—Here Is The Reason

In the CryptoQuant Quicktake post, an analyst shared insights on the latest trends in the circulating supply of stablecoins. "Stablecoin" refers to cryptocurrencies that follow the price of a fiat currency, with USD being the most popular choice. These tokens operate on various networks, but in the context of the current topic, only Ethereum-based tokens are of interest. Essentially, stablecoins have a relatively 'stable' value, which is why investors often buy these coins whenever they want to avoid the volatility commonly seen in assets like Bitcoin. However, those who hold investments in stablecoins often plan to eventually return to the volatile side of the industry. Because if they do not do so, they will exit with fiat currency instead. When these traders feel the time is ripe, they use their stablecoins to swap into Bitcoin or any desired coin. This shift naturally creates buying pressure on the asset's price. Due to the potential of stablecoins acting as a dry powder for volatile cryptocurrencies, these assets are often viewed as the readily available supply of the industry. Therefore, its increase in value can be seen as a bullish signal. Here is the chart shared by quant, showing the trend of ERC-20 stablecoin supply over the past year and a half:

As shown in the chart above, the supply of stablecoins has increased over the past few months, indicating that capital has flowed into these tokens pegged to fiat currency. This increase in this metric occurs while Bitcoin is experiencing a downtrend. In the chart, the analyst also highlighted the trend that the indicator has followed during the bearish phase of BTC since last year. It seems that the supply of stablecoin has remained flat at that time. This implies that when BTC adjusts in 2024, a net amount of capital will flow out of this sector as if capital is shifting to stablecoins, their supply will increase. However, this time, a real capital rotation has occurred, with these stablecoin buyers potentially waiting for a profitable entry point. Of course, this current setup is not the most optimistic; that would happen if both Bitcoin's market capitalization and the supply of stablecoins increased simultaneously. However, the fact that stablecoins are not being contracted during this market downturn can still be seen as a positive sign for Bitcoin. BTC price Bitcoin has once again experienced another failed recovery as the price dropped to $84,000, after previously surpassing $87,000 just before.