As Bitcoin (BTC) maintains its position around the $70,000 price mark, there is ongoing discussion among investors and analysts about the specific factors that will drive the markets higher. Founder and CEO of CryptoQuant, Ki Young Ju, recently pointed out that despite the continual growth in stablecoin supply, this increase is not significant enough to generate substantial buy-side liquidity and push BTC prices upwards.
Ju presented the current Bitcoin-to-Stablecoin Exchange Reserve Ratio, a metric that compares the amount of Bitcoin held on exchanges to stablecoins. This ratio reveals that there is approximately six times more BTC stored on exchanges than stablecoins.
In September 2021, stablecoin reserves were valued at $30 billion, while the total stablecoin market capitalization currently stands at around $166 billion. However, only 21% of these stablecoins are held on exchanges for trading purposes, a noticeable drop from 2021 when over 50% of the total stablecoin supply was held on exchanges.
According to the CryptoQuant CEO, despite the continuous growth in stablecoin supply, these coins are mostly being utilized for purposes other than trading in the current market environment.
Ki Young Ju highlighted the increasing trend of stablecoins being used as a store of value or for remittances. Chainalysis data indicates that over 50% of total remittances sent to countries like Venezuela, Argentina, Brazil, Colombia, and Mexico in 2022-2023 were in the form of stablecoins used for storing value.
This trend is evident in regions with high inflation rates, including Turkey, which Chainalysis identified as having the highest percentage of stablecoin purchases relative to GDP.
Looking ahead, Ju emphasized the importance of liquidity from digital asset exchange-traded funds and US dollar liquidity from Coinbase in supporting the markets in the coming months. WonderFi CEO, Dean Skurka, echoed similar sentiments, noting that strong ETF inflows indicate robust and sustainable institutional interest in Bitcoin.
Skurka believes that this significant institutional interest, coupled with macroeconomic factors in the US and Canada, will serve as positive price catalysts for the scarce decentralized asset.