How does the outflow of stablecoins affect the price of Bitcoin?

Impact of stablecoin outflow on Bitcoin price

Author: Michael Rinko

Translation: Biteye Core Contributor Crush

How does the outflow of stablecoins affect cryptocurrency prices? Is the market still purely a game for individual investors? This article will give you the answer today.

The market value of stablecoins has been declining for the past two years, and the current decline has even returned to the level of the bear market in 2018.

If we conduct regression analysis, we will find that the total market value of stablecoins has a strong correlation with Bitcoin, r=0.68, r^2=0.47.

(Translator’s note: Here, r represents the correlation between the market value of stablecoins and the price of Bitcoin, ranging from -1 to 1. -1 indicates 100% negative correlation, and 1 indicates 100% positive correlation; r squared represents explanatory power, for example, here it means that 47% of the current price of Bitcoin can be explained by the market value of stablecoins, and the remaining part may be caused by other reasons.)

Its correlation with Ethereum is even stronger, r=0.80, r^2=0.64. This is likely due to Ethereum’s significant decentralized financial ecosystem.

The market value of stablecoins has the strongest correlation with the total locked value in DeFi, r=0.80, r^2=0.65.

This is reasonable because most people enter DeFi through stablecoins, and more stablecoins mean more locked value in DeFi.

Overall, there doesn’t seem to be a clear cause-and-effect relationship between Bitcoin and the market value of stablecoins. We can verify this by conducting correlation analysis with different lag periods from -10 to 10 days. We found that the highest correlation between Bitcoin and the total market value of stablecoins occurs at 0-day lag.

(Translator’s note: Here, the lag period refers to shifting the market value of stablecoins forward by 10 days, 9 days, 8 days, and so on, until shifting the data backward by 10 days, and then conducting correlation analysis between the value of each day and the price of Bitcoin on that day to check whether there is some degree of temporal causality or relationship between the two.)

If we expand it to a 180-day growth rate, we can see that in the previous cycle, the market value of stablecoins led the rise in Bitcoin, but in the decline, Bitcoin led the way ahead of stablecoins.

However, we should not rely too much on this observed relationship, as it is based on only one market cycle.

Here is a chart of the 1-year growth rate:

In conclusion, @Pentosh1’s statement is correct. Currently, the entire market is still in a PVP game state, and once we see a large influx of stablecoins, this may indicate the return of more retail investors and risk-takers.

For those interested in stablecoins, you can use Chaineye’s stablecoin dashboard to learn more detailed data.

https://chaineye.tools/stablecoins

We will continue to update Blocking; if you have any questions or suggestions, please contact us!

Share:

Was this article helpful?

93 out of 132 found this helpful

Discover more

Market

Bitcoin once fell below $10,000 and fell nearly 30% in a few days.

Netease Technology News July 2 news, the United States local time on Monday, bitcoin prices fell back below 10,000 US...

Blockchain

2020: Nonprofits fall in love with Bitcoin?

Microsoft accepts Bitcoin. No one cares. why? Because if you want people to give up their bitcoin, you better have a ...

Blockchain

"The Secret History of Bitcoin": Who is the super-large Bitcoin mining pool with a computing power that approached 51%?

Source: Hash Pie Author: LucyCheng In the previous story, we talked about a sudden hard fork event called "51% a...

Blockchain

QKL123 market analysis | No turning point in the global epidemic, U.S. stock futures re-melt, Bitcoin linkage down (0323)

Abstract: After the market rebounded for three consecutive days, it continued to be affected by global capital market...

Blockchain

2020 "Yield Reduction" Year, Surprise or Fright?

Text | 嚯 嚯 Edit | Sword 2020 is a year of concentrated outbreaks of "reduction in production"...

Blockchain

Spending $100 million a year, can the $200 million financing that ConsenSys seeks be completed?

According to the technology media The Information reported on April 15, New York-based blockchain company ConsenSys i...