Crypto Market Sees Influx of Capital as Stablecoins Rebound After a Year-long Downturn

Capital inflow into the cryptocurrency space surged to over a year high as both retail and institution investors increased their holdings and investments in key coins, according to data tracked by blockchain analytics firm Glassnode.

The 90-day net change in the supply of the top four stablecoins – Tether (USDT), USD Coin (USDC), Binance USD (BUSD), and Dai (DAI) – has turned positive, a trend unseen since the collapse of Terra in mid-May 2022.

Stablecoins, pegged to the U.S. dollar, have been a significant source of funding for cryptocurrency purchases since 2020.

The recent increase in their supply is interpreted as potential buying pressure or available funds for investors to deploy in cryptocurrency investments or margin trading.

Reflexivity Research noted, “This week, the 90-day change in aggregated stablecoin supplies flipped positive for the first time in 1.5 years. This signals increased liquidity on-chain expressed through stablecoins and can be perceived as a sign of capital inflows.”

This shift aligns with Bitcoin’s year-to-date doubling to over $35,000, primarily driven by expectations of U.S. regulators approving a cryptocurrency exchange-traded fund (ETF).

The positive percentage change in stablecoin supplies marks a recovery from the downturn that began in May 2022, triggered by the collapse of Terra’s LUNA token and subsequent market uncertainties.

As market confidence rebuilds, the return of liquidity through stablecoins suggests a renewed investor interest and potential for increased cryptocurrency activities in the coming months.