Stablecoins are cryptocurrencies that are designed to mirror the value of other assets, such as US dollars, allowing us to store funds without having to withdraw them from digital wallets. We can think of them as a form of cash for investment in the cryptocurrency market. By looking at their number, we are able to assess whether or not more funds are currently available for investment in this market. The number of stablecoins has been continuously decreasing since May 2022, dropping by 33.6%. November, however, is the first month in 1.5 years in which we notice an increase of 3.4%. What could be the consequences of this for the cryptocurrency market as a whole?
Table of contents:
What does the increase in stablecoin mean?
Stablecoins are often used as a vehicle for transactions in the cryptocurrency market, as their stable value can help avoid the risks associated with large price fluctuations. They can also act as a means of storing capital, as their value does not fluctuate significantly over a short period of time.
Increasing the amount of virtual money in the system can result in the same thing as central bank money printing for the financial system. The previous lack of new cash to spend could lead to a shortage of funds available for new investment. This, in turn, may have caused the market to weaken significantly, as manifested by reduced trading volumes on cryptocurrency exchanges. The current rebound may mark the first influx of new funds into the market in 1.5 years. Historically in the exchange market, an increase in the amount of money in circulation has had a very positive impact on asset valuations.
Source: Btctools
Chances of a new bull market in BTC are growing
The price of bitcoin has risen by as much as 120% since the beginning of the year, surpassing the US$38,000 level. Despite this, we are still 45% short of reaching historic highs. Unlike many other asset classes, it is difficult to really predict the specific levels that bitcoin will reach, although there are many predictions emerging. The current momentum, for the first time in a long time confirmed by the influx of new funds into this market, may increase the chances of the current trend continuing.
It is worth recalling that bitcoin currently accounts for 53% of the total cryptocurrency market capitalisation, followed by ethereum with a 17.6% share. The average correlation of the 100 largest cryptocurrencies, as measured by the correlation with bitcoin, is 0.7. This means that without an increase in the value of bitcoin, it is difficult to expect an increase in the value of the other cryptocurrencies.
Source: Conotoxia MT5, BTCUSD, Daily
Grzegorz Dróżdż, CAI MPW, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72.95% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
