Crypto Market Witnesses Influx of Capital for the First Time in 17 Months

In a noteworthy development, the cryptocurrency market is experiencing a net capital inflow after 17 months. This positive shift is primarily attributed to the increased supply of the top four stablecoins, marking a significant turnaround.

Data compiled by blockchain analytics firm Glassnode reveals that the 90-day net change in the supply of major stablecoins, including tether (USDT), USD Coin (USDC), Binance USD (BUSD), and Dai (DAI), has entered positive territory. This is a remarkable reversal of the trend that persisted since the collapse of Terra in mid-May 2022.

Stablecoins have played a pivotal role in facilitating cryptocurrency transactions since 2020. Consequently, the upswing in stablecoin supply indicates potential buying pressure and available resources that investors can utilize to acquire cryptocurrencies or engage in margin trading for derivatives.

It's worth noting that this indicator had turned negative during the initial half of May 2022, coinciding with the sharp decline of Terra's LUNA token, which was designed to support the blockchain's algorithmic stablecoin, UST. The sudden crash from $80 to mere cents resulted in substantial losses for investors and negatively impacted market sentiment.

Subsequent months witnessed a continued outflow of liquidity from the market due to various factors such as fund bankruptcies, challenges faced by crypto lenders, and issues at the FTX exchange. These events collectively eroded investor confidence, leading to the prolonged negative trend in the supply of stablecoins.

Now, with stablecoin supplies rebounding, the crypto market is showing signs of renewed vigor, drawing attention from investors and traders eager to take advantage of the fresh capital inflow.