Cryptocurrency market analysts have traditionally relied on demand for spot Bitcoin (BTC) ETFs to predict the direction of digital asset prices.
But a new report by 10x Research suggests that stablecoin supply may be a more accurate indicator of crypto demand.
Stablecoins, digital assets with a fixed price predominantly pegged to the US dollar, are a crucial infrastructure component that bridges the gap between traditional currencies and the digital asset world and provides liquidity for trading. According to Markus Thielen, founder of 10x Research, changes in their supply offer valuable information about the health of the crypto market.
“We recommend paying less attention to Bitcoin ETF flows,” Thielen said in the report, adding:
“Stablecoin issuers are the new sheriffs in town and they are driving this market even higher.”
The report noted the rapid expansion in stablecoin supply, suggesting that this could point to higher crypto prices in the future. Over the past 30 days, the supply of the two largest stablecoins, Tether (USDT) and USDC, has increased by approximately $10 billion in total. Meanwhile, the supply of the third and fourth largest stablecoins, MakerDAO's DAI and Hong Kong-based First Digital's FDUSD, also expanded by 5%-10% during this period.
“Fiat money is moving to crypto at a rapid pace,” Thielen said.
In comparison, US-based spot Bitcoin ETFs attracted $5 billion in net inflows over the past 30 days. Thielen pointed out that the mint from stablecoins is twice as large and can represent long-term exposure, unlike ETFs.
*This is not investment advice.