Predictive Strength
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Predictive Strength
Stablecoin Supply measures the total supply of stablecoins across multiple blockchains. Stablecoins act as “dry powder” in crypto markets, quantifying latent demand. When investors hold them, they’re effectively parking cash in the ecosystem, ready to deploy. The relationship is straightforward: more stablecoins means more potential buying power for other crypto assets. When we see a growing supply of stablecoins—especially on exchanges—it signals that market participants are accumulating liquidity. They’re waiting, like buyers at a silent auction, for the right moment to enter the Bitcoin market.
Stablecoins act as "dry powder" parked in crypto's risk-off parking lot. The 10.9% YTD supply growth represents $20B+ in potential buying power waiting to rotate into Bitcoin and altcoins. Historical patterns show stablecoin accumulation phases (like Q4 2024's $23B surge) consistently precede BTC rallies, as seen in 2021's 177% stablecoin cap growth before the $69K ATH. This parked liquidity behaves like limit orders waiting execution.
Stablecoin supply data is sourced through on-chain analytics tracking mint/burn transactions across blockchains. Aggregated metrics are normalized against historical averages to create a relative index, with adjustments for inorganic activity (e.g., bot transactions).
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To understand a predictive factors predictive power, we create a simple long/short strategy and simulate its past performance (with daily rebalancing):
The strategy is rebalanced daily, on a continuous basis. There are 0.5% transaction costs applied on each position adjustment.
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