Stablecoin Growth Matters More Than Bitcoin ETF Inflows for Crypto Bull Market: Analyst

In the past 30 days, USDT and USDC supply surged by $10 billion, twice the inflows to bitcoin ETFs, according to 10x Research. Stablecoins, mostly pegged to the U.S. dollar, connect traditional currencies to digital assets and trading liquidity.  

Stablecoins may indicate crypto demand better than bitcoin ETF inflows, 10x Research said. This year, crypto market analysts have focused on spot bitcoin [BTC] ETF demand to predict digital asset prices.  

In a Monday research, 10x Research suggested that stablecoin supply may be a better indication of crypto demand and that its rapid growth predicts higher pricing. "We suggest paying less attention to the bitcoin ETF flows," 10x Research founder Markus Thielen wrote. "Stablecoin issuers are the new sheriff in town, driving this market higher."  

Stablecoins, digital assets with a fixed price, mostly pegged to the U.S. dollar, provide liquidity for trading while connecting fiat currencies to the digital asset sector. The 10x research noted that market players mint stablecoins with fiat money, therefore their supply indicates crypto market health.  

Tether's USDT and Circle's USDC, the two largest stablecoins, increased by approximately $10 billion in the past 30 days, according to 10x Research. CoinGecko data shows that MakerDAO's DAI and Hong Kong-based First Digital's FDUSD, the third and fourth largest stablecoins, also increased by 5%-10%.  

The research said that USDT rose by $2.4 billion in a week, one of the greatest in this bull market. U.S. spot bitcoin ETFs had $5 billion in net inflows in the past 30 days, the research said. "The minting from stablecoins is twice as large and might be long-only exposure, contrary to the ETFs," he said. Smart traders may have skewed ETF inflows by taking a "carry trade."  

Futures traders betting on higher prices (longs) pay shorts who benefit from price decreases at near-record funding rates. Smart investors can use a carry trade to buy spot BTC or shares of a spot-based ETF and sell equal-sized BTC futures to maintain a neutral position and profit on the price difference.  

In another report last week, 10x highlighted that hedge funds owned record BTC futures short positions on the regulated Chicago Mercantile Exchange, possibly due to excessive carry trade demand  

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