As the Bitcoin Rally Seems to Have Stopped, Stablecoin Expansion Persists

With a total supply of $141.42 billion, the three leading stablecoins—USDT, USDC, and DAI—have reached their highest point since May 2022. According to the numbers, money is still pouring into the cryptocurrency market.  

The biggest cryptocurrency by market value, bitcoin, appears to have a lot of room to grow, according to other indications such as its MVRV Z-score.  

The recent acceleration in Bitcoin's {{BTC}} sharp surge has slowed down. As a reassurance to bitcoin bulls, the number of dollar-pegged cryptocurrencies, also known as stablecoins, is rising. This is seen as a potential powder keg for funding token purchases.  

On March 14, Bitcoin reached a new high of over $73,500. Since then, it has faced difficulties in maintaining gains above $70,000, mostly because the likelihood of Fed rate cuts in June is decreasing. With a 10% decline from its all-time high, the leading cryptocurrency by market value was trading at $66,300 as of press time.  

At the same time, according to data from the charting platform TradingView, the cumulative supply of the top three stablecoins—tether (USDT), USD Coin (USDC), and DAI (DAI)—which control more than 90% of the stablecoin market—climbed 2.1% to $141.42 billion, hitting its highest point since May 2022. This year, the total supply has increased by more than $20 billion.  

Reflexivity Research sees the ongoing increase in the quantity of stablecoins—a measure of liquidity—as a good indicator for the cryptocurrency market. "As this [stablecoin supply] continues to trend up, this shows that capital continues to flow into crypto markets," commented Reflexivity Research in a bulletin dated April 2.

The principal means of buying and selling cryptocurrencies on the spot market and in derivatives trading has evolved over the years to be stablecoins, spearheaded by tether. Traders' preference for stablecoin-margined crypto futures over token-margined ones has been growing since the latter half of 2021.  

A linear payment is offered by stablecoin-margined futures, where the collateral's value stays constant regardless of market volatility. Because of this, traders can stop worrying about finding a way to hedge their collateral. The Z-score of the market value to realized value (MVRV) ratio of bitcoin and other indicators also point to an upward trend.  

One way to quantify the gap between market and realized values is with the MVRV Z-score. The second method, which is seen as a stand-in for fair value, estimates the total value of all coins by aggregating their market value when they were last transacted on the blockchain.  

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