Bitcoin’s[1] price drop to the $43,000-level was a result of several factors like miner metrics, exchange reserves, trade volume, and other on-chain metrics. However, since then, the number of active Bitcoin[2] addresses has increased by 0.8% week-over-week. Hash rate has also continued to climb, with a hike in the same considered a positive sign for the health of the blockchain.
Stablecoin inflows were another factor, and a significant one, since stablecoins had a big week amidst the market’s volatility. USDC was leading with an increase of over $1 billion in a week, with the number of USDC transfers surging too. In fact, USDC registered a 13.5% week-over-week hike for an average of about 60,400 a day.
Source: Coinometrics[3]
After USDC’s supply surpassed 9 billion, it went parabolic towards the end of February, with the supply doubling since the start of the year. Such an increase in stablecoin supply has had a bearish impact on Bitcoin’s[4] price on spot exchanges.
However, this has also heralded a shift in stablecoin dynamics, with USDC’s increasing supply contributing to Tether’s supply dominance dropping to its lowest level.
Source: CoinMetrics[5]
Traders may hold a contrarian view as stablecoin supply increases demand and investment flow to Bitcoin, altcoins, and DeFi, they are used as collateral. When Bitcoin’s volatility is low, there is a competition between stablecoins and Bitcoin since amidst market volatility, traders have held realized profits in Tether or USDC.
A drop in Tether’s supply dominance may also shift Bitcoin’s regional dominance and trade volume distribution. This may have a negative impact on the price of Bitcoin on spot exchanges where stablecoin inflows are the highest.
A change in regional dominance might have a long-term impact on miner metrics and on-chain metrics as
