When Stablecoin On-Chain Metrics Become Unstable

As the crowd gets more and more bearish, mainly out of sheer impatience right now more than anything else, we can keep an eye on what's going in the background with stablecoins. Realistically, there are really five scenarios when it comes to the direction of Bitcoin and stablecoin marketcaps at any given time. My ranking of these 5 is up for debate, but here is how I'd list them for most ideal to least for bullish traders:

1) Bitcoin market cap going up, stablecoin market cap going up

2) Bitcoin market cap going up, stablecoin market cap going down

3) Bitcoin market cap going down, stablecoin market cap going up

4) Bitcoin market cap going down, stablecoin market cap going down

Now as we can see here, the overall stablecoin market cap (combining the top 4: USDT, USDC, BUSD, DAI) has been dropping since November. Not great to see, and that pretty much eliminates us being in scenario #1.

Since mid-April, in fact, Bitcoin has been retracing mildly while the combined market cap of these stablecoins has been shrinking as well. Not ideal.

However, some may argue that whale stablecoin holdings are a bit more important. We like to take a look at what the $100k-$10m large sharks to mid-sized whales are doing as a key indicator for how much buying power the key players in crypto are possessing.

And right now, based on recent times, it looks like the sharks and whales have somewhat peaked. Tether's climb has at least gone on pause, as has Dai and Binance USD. USD Coin is really the only coin that is seeing the large holder accumulation moving in the right direction.

What about prices themselves? Have we seen any crazy anomalies that could indicate something is brewing? It doesn't appear so, other than the usual extra rockiness from USDP, which seems to have the hardest time sticking very tightly near $1 at all times like the rest of the top stablecoins.

And as far actual raw $100k+ transactions happening on the top 6 stablecoin networks, there doesn't appear to be any special activity. Since the surge of activity that signified a huge upswing for crypto, major stakeholders in stablecoins have not gotten out of line, and have ever so slightly been making less huge transactions as their market caps shrink.

Overall, there are some concerns about the overall market cap of stablecoins continuing to drop while Bitcoin's price has trouble regaining the $30k level. To compound this concern, we need to be weary of shark and whale holdings of Tether potentially peaking after they accumulated them quite aggressively throughout 2023 thus far.

We'll check back in over the next month or two to see how these developments play out.


Disclaimer: The opinions expressed in the post are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.

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