Stablecoin Supply Trends: Indications for Bitcoin Rally?

Key Insights

• Large wallets holding stablecoin capital predominantly keep their assets on exchanges, but are the trading volumes sufficient for a Bitcoin rally?
• Analysis of exchange balances in stablecoins like USDT and USDC suggests that investors are not preparing for a Bitcoin rally in the near future.
• The supply of stablecoins on exchanges has been steadily declining since the beginning of 2023.

Exchange balances in stablecoins tether (USDT) and USD coin (USDC) do not indicate that investors are preparing for a Bitcoin (BTC) rally in the foreseeable future. Figures released by analysts at Santiment hint at this.

The presented data indicate that the majority of the top 10 wallets, ranked by size, in stablecoins hold their assets on exchanges. However, the specifics regarding what exactly is held are not specified.

Moreover, storage on exchanges alone can hardly speak of preparations for a Bitcoin rally.

USDC supply on centralized exchanges drops

As the chart below shows, stablecoin supply on the trading floors has been steadily falling since the beginning of 2023.

USDT investors have halted the withdrawal of stablecoins from exchange wallets, putting an end to the downtrend in early June.

At present, centralized exchanges have listed just over 21% of the total USDT supply, equivalent to approximately $17.5 billion.

Conversely, USDC users continue to withdraw funds from exchanges, leaving less than 0.5% of the total USDC supply (approximately $88 million) remaining on these platforms.

The withdrawal of USDC by Circle for conversion into US dollars remains uncertain.

Notably, Kaiko analysts have observed that USDC is predominantly utilized in the decentralized finance (DeFi) market rather than centralized exchanges.

Furthermore, experts have highlighted the potential impact of weak liquidity on centralized exchanges, which may have contributed to the temporary deviation of USDC’s peg to the US dollar. This pattern appears to be recurring.

Additionally, data reveals an increase in stablecoin supply on exchanges just before the Bitcoin price surged from $25,000 to $31,000.

Rising liquidity in stablecoin may signal investor interest in buying cryptocurrency.

However, starting from mid-June, there are no prominent hints of a new pump. Since then, USDC supply has continued to fall, and there have been no large capital inflows from USDT.

Are stablecoin supply trends providing indications for an upcoming Bitcoin rally? Share your thoughts in the comments.