With Bitcoin hovering around the $70,000 mark, investors and analysts are carefully examining what factors could drive the next price breakout. According to CryptoQuant’s founder and CEO, Ki Young Ju, the supply of stablecoins is growing, but the volume currently circulating on exchanges may not be sufficient to significantly boost Bitcoin’s buy-side liquidity.
His analysis highlights the Bitcoin-to-Stablecoin Exchange Reserve Ratio, a metric showing six times more Bitcoin on exchanges than stablecoins—a disparity limiting liquidity for further upward momentum.
Stablecoins Serve Diverse Roles Beyond Trading
Ju pointed out a shift in the role of stablecoins, which have increasingly become a means of storing value and remittances rather than direct trading instruments. Data from Chainalysis reveals that in 2022-2023, more than half of all remittances to countries like Venezuela, Argentina, Brazil, Colombia, and Mexico were stablecoin-based, aiding citizens in preserving value amid inflation. The trend extends globally, with high-inflation countries like Turkey using stablecoins significantly as a hedge, as confirmed by Chainalysis.
This repurposing of stablecoins has had a noticeable effect on exchange supply dynamics. While the total stablecoin market cap has grown to around $166 billion, only 21% of it is held on exchanges for trading purposes. By contrast, in 2021, over half of the stablecoin supply was exchange-bound, highlighting how stablecoins are increasingly serving as a financial lifeline and store of value, especially in economically volatile regions.
Institutional ETF Flows Expected to Influence Liquidity
Beyond stablecoin dynamics, Ju suggested that fresh liquidity from digital asset exchange-traded funds (ETFs) and U.S. dollar reserves on Coinbase could be pivotal to sustaining Bitcoin’s growth. WonderFi CEO Dean Skurka also weighed in, affirming that robust ETF inflows indicate sustainable institutional interest in Bitcoin. Skurka noted that institutional inflows, alongside broader macroeconomic factors in North America, might create positive price catalysts for Bitcoin in the coming months.
As institutional participation continues to expand, the availability of U.S. dollar liquidity on prominent exchanges like Coinbase will likely play a central role in supporting Bitcoin’s growth. Observers expect these factors to boost buy-side pressure on Bitcoin, setting up the market for potential price gains.
With stablecoins now performing varied functions and ETFs signaling increased interest from big players, Bitcoin’s performance in the months ahead will be shaped by the evolving balance of liquidity and demand across these financial instruments.
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