Stablecoin Supply Can't Drive the Bitcoin Market Alone

When Bitcoin (BTC) fluctuates around the price level of $70,000, investors and expert analysts debate the specific factors that could drive the market higher. CryptoQuant founder and CEO Ki Young Ju recently explained that although the supply of stablecoins continues to increase, the volume is not yet high enough to create significant buying liquidation and push the price of BTC up. The CryptoQuant founder provided the current Bitcoin-to-Stablecoin Exchange Reserves ratio - a metric that measures the reserves of Bitcoin on exchanges compared to stablecoins - which shows that there are about six times more BTC held on exchanges than stablecoins. According to Ju, stablecoin reserves reached a value of $30 billion in September 2021. Currently, the total market capitalization of stablecoins is around $166 billion. However, only 21% of this is held on exchanges for trading - a far cry from 2021 when over 50% of the total stablecoin supply was held on exchanges. The CryptoQuant CEO argues that while the supply of stablecoins continues to grow, stablecoins are primarily being used for purposes other than trading in the current market cycle. The trend of increasing use of stablecoins as a store of value or for remittances is occurring across all regions with high inflation, including Turkey - which Chainalysis identified as the country with the largest stablecoin purchase ratio compared to Gross Domestic Product (GDP). Ju concludes that liquidation from digital asset exchange-traded funds and USD liquidation from Coinbase will be "crucial" in sustaining the market in the coming months. WonderFi CEO, Dean Skurka, recently made similar comments and noted that strong ETF inflows are a sign of sustained institutional interest in Bitcoin. Skurka argues that this strong institutional interest, along with macroeconomic factors in the US and Canada, will be positive price catalysts for this scarce decentralized asset.