As Bitcoin ticks up this morning, around $39,000 as of press time, Prashant Jha at Cointelegraph is pointing out how stablecoins are being used to make secondary plays.
Large investors, he says, have increased their buying power in the Tether (USDT) market to a full 7%.
“Buying power is defined as the capacity of stablecoins to buy Bitcoin … thereby driving its price higher,” Jha writes. “When the price of Bitcoin is low, the stablecoin supply is able to purchase a bigger share of the circulating BTC supply, causing the price to rise, thus buying power is high and vice versa.”
Jha also mentions the outflow of Bitcoin from exchanges.
“The significant accumulation of stablecoins by whales indicates they are waiting to buy BTC at a lower price, showing a bullish outlook for the market,” Jha writes. “The outflow of BTC from exchanges also supports this sentiment. Out of the past 26 weeks, 21 weeks have seen a higher flow of BTC supply away from exchanges than on to it.”
In other words, there is the sentiment that a smaller downturn in Bitcoin prices would trigger this additional investment, which would drive prices up fairly immediately.
Jha also has some thoughts on the Bitcoin’s correlation with the S&P 500, which over the past quarter has been decried as a possible change from the coin’s previous status as a safe haven from equities.
“The close correlation of Bitcoin with the S&P 500 has also been seen as one of the reasons behind its current sluggish price momentum, while gold rose to a multi-week high,” Jha continues. “However, the price momentum is quite similar to the first half of 2021, where gold outshined BTC for the first two quarters while BTC maintained a close correlation with the equity market.”
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