Market Reversal: Money is flowing back into the market after an 18-month slumber
article by CryptoJelleNL
Big news, money is flowing back into the market! After an 18-month slumber, the 90-day net change in stablecoin supply has flipped positive – indicating that money is not leaving the market, but entering it.
More precisely, according to data from blockchain analytics firm Glassnode, the 90-day net change in the supply of Tether (USDT), USD Coin (USDC), Binance USD (BUSD) and Dai (DAI) has flipped positive for the first time since May of 2022, around the time that Do Kwon's Terra / Luna collapsed, crashing the blockchains stablecoin UST, wiping out billions of dollars in investor funds.
In the months that followed Luna's collapse, billions of dollars continued to leave the cryptocurrency markets, as bankruptcies, hacks, and collapses plagued the market. Billions of USDT, USDC, BUSD, and DAI were burned as a result.
Now obviously, stablecoins are generally used to invest in the market – so the supply of stablecoins increasing can be seen as increased buying interest, or capital to use for derivatives trading. Either way – it results in increased liquidity, which means better trading conditions & generally speaking; an upside.
This new inflow of capital comes as no surprise, as investor sentiment keeps improving – mostly on the back-of-the-spot ETF applications from the likes of BlackRock, Fidelity, and others.
Especially after the court victories of Ripple Labs & Grayscale (in which the courts overruled the SEC's decision to deny Grayscale's bid to convert their Bitcoin trust into a spot ETF – forcing the SEC to reconsider), investors are getting more and more confident that US institutions, pension funds, and citizens will soon have easy access to crypto through spot ETFs.
Assets managed by these brokers, banks, and RIAs in the US total nearly $50 trillion (Source: Consensus Magazine), which means that only a fraction of these funds will already have a lasting impact on Bitcoin's price.
Stablecoin inflows, driven by real demand?
Without naming names, there are a few influential people in the crypto space who seem to believe that these stablecoins are being printed without any real demand backing them – to artificially inflate prices.
These accusations aren't new. They've been around since the inception of Tether. So stubbornly so, that a class-action lawsuit was brought against Tether, claiming that Tether's statements regarding stablecoin USDT being backed one-to-one by the U.S. dollar, were false.
This class-action lawsuit was dismissed by the courts on the 4th of August, of this year. The court found that the plaintiffs' complaint lacked any "plausible allegations of injuries" because it contained no evidence that USDT had a diminished actual value at all".
The dismissal of the class action was made final just days ago, on the 15th of November – after the plaintiffs decided against appealing the court's decision.
In addition to the court's dismissal of claims that Tether tokens are not fully backed by real-world assets, Tether also publishes a full reserve breakdown on their website, and routinely publishes independent audits of the consolidated reserves as well; to address any concerns about the backing of the token.
In the most recent audit report, BDO concluded: "In our opinion, the CRR as prepared by the management of the Group as of 30 September 2023, is, in all material respects, fairly represented in accordance with the criteria, including Management's Key Accounting Policies, set out therein."
Closing Thoughts
In conclusion, real-world capital is flowing back into the crypto markets. Bitcoin spot ETFs are on the horizon, yet another Bitcoin halving event is scheduled to take place in the next 6 months, and investors are once again looking to take advantage.
The future is bright. Bring on the bull market.
Author's Disclaimer: This article is based on my limited knowledge and experience, and is my personal opinion. It has been written for informational purposes only. It should not be construed as investment advice in any shape or form.
Editor's note: CryptoJelleNL provides insights into the cryptocurrency industry. He has been actively participating in financial markets for over 5 years, primarily focusing on long-term investments in both the stock market and crypto. While he watches the returns of those investments roll in, he writes articles for multiple platforms. From now on, he will be contributing his insights for Alpha Circle as well.
Check out his twitter: twitter.com/cryptojellenl
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