How stablecoins affect the BTC price

This article first appeared on sanctuary.net

Bitcoin has turned traders’ heads for another day: BTC continued its dance between $29,700 and $31,100, just as it has done steadily since June 21. There are several reasons to be optimistic that this resistance can be broken to the upside in the near term. But one component that’s been overlooked so far is the behavior of stablecoins.

Tether (USDT) and USD Coin (USDC) in particular have shown some interesting correlations historically, suggesting that the entire crypto sector may be pumped (or dumped). The two largest stablecoins by market cap are playing an important role in where markets may move next. Here are some examples of metrics to keep an eye on.

Average age of invested dollar

The “average age of the invested dollar” (Mean Dollar Invested Age) is a metric that we would call a “Validator”. A downward-moving curve of the line suggests that any upswing in the crypto market will be validated by dormant coins, which will push prices even higher in the future.

In the case of stablecoins, the movement of older coins that have been stagnant in wallets generally bodes well. Especially if it’s a dormant move originating from a top stablecoin. Because that usually means that the coins are moved to buy cryptocurrencies.

Holdings of wallets with $100,000 to $10 million in stablecoins

One should also pay attention to what the top shark and whale positions are doing with their stablecoin holdings. In most analysis, we focus on the wallets holding between 100,000 and 10 million USDT or USDC.

There are several ways to study the behavior of these stablecoin sharks and whales:

• If stablecoins fall and BTC prices rise, it could be a sign that big players are converting their stablecoins to Bitcoin to push the price up and make money (bullish).
• If stablecoins rise and BTC prices fall, it could mean that major players are selling their BTC (or other coins) and reinvesting (bearish) in stablecoins.
• If stablecoins rise and BTC prices rise, it could mean that more fiat is pouring into the market and prices could rise (bullish) without much help from shark and whale stablecoin injections.
• If stablecoins fall and BTC prices fall, it could mean that cryptocurrencies are sold without being converted back into stablecoins. It increases the likelihood that assets will be taken out of the crypto sector entirely and migrated (bearish) back into Hai or Wal-Fiat bank accounts.

Supply on the exchanges (as a percentage of the total supply)

The percentage of each stablecoin’s supply lying on exchanges can be a precursor to crypto price movements. Especially if USDT and USDC holdings are moving quickly to exchanges, as USDC was seen in March just before the market-wide price surge.

Offer of the most important stock exchange addresses

Similar to the overall share of supply, one can also take a look at the top 10 USDT and USDC addresses to see if large amounts of stablecoins are pouring into their pockets. Comparing the top 10 largest names for both assets to the total supply on the exchanges, one can see that most of the largest names are currently on the exchanges.

Analyzing stablecoins might be a little boring for most of the year. But when anomalies suddenly crop up in these types of metrics for USDT and USDC, they can be some of the most important alpha signals to keep an eye on.