Balances of dai (DAI) and USD coin (USDC) on exchanges reached new all-time highs in the past week, according to data from Glassnode.
The increase may be a bullish indicator for the crypto market as a whole if it reflects buyers’ plans to use the two stablecoins to buy more crypto assets.
The balance of dollar-pegged USDC on exchanges reached over $915 million Friday, while the amount of decentralized stablecoin dai on exchanges went above $81 million on Sunday, according to Glassnode.
USDC on exchanges “represents almost $1 billion worth of buying power from USDC alone, poised to move into assets” such as bitcoin, according to Glassnode’s weekly newsletter dated Feb 1. “This high figure should increase investors’ confidence in any dips being quickly bought up, making it a bullish signal.”
As CoinDesk reported Tuesday, some analysts see several on-chain metrics for bitcoin’s price pointing in a bullish direction in the coming weeks. For example, a decreased amount of bitcoin held on exchange addresses indicates less pressure on the sell side.
In crypto trading, traders and investors often use stablecoins to put money into riskier cryptocurrencies; in such cases, buying stablecoins backed by government-issued currencies is seen as the first step necessary before buying other cryptocurrencies.
“The growth in on-exchange USDC reflects the increasing view among traders that USDC is a preferred base currency, as well as the fact that a lot of the new flows into crypto are starting with on-exchange activity,” Jeremy Allaire, co-founder and CEO of peer-to-peer payments company Circle, told CoinDesk through a spokesperson. He noted that USDC issuance in January saw “record levels.” Circle and crypto exchange Coinbase are behind USDC’s governing Centre consortium.
The circulating supply of USDC, which is valued 1:1 with the U.S. dollar, has grown to over 5 billion from just below 4 billion in the beginning of the month, sharp growth after slowing in October, according to data from Glassnode.
Increased exchange activity is also reflected in the significant price rise of exchanges’ utility tokens. Centralized exchanges Binance and FTX and decentralized exchanges Uniswap and SushiSwap all saw their exchange tokens hit new all-time highs in the past week.
As of press time, MakerDAO did not respond to CoinDesk’s requests for comment regarding its dai stablecoin.
Data compiled by CoinDesk shows that tether (USDT) is still the stablecoin king despite recent controversies involving its issuing company. Tether currently has over $27 billion in market capitalization but its balance on exchanges in the past two months has been more volatile.
“New flows [to crypto markets] are coming from more mainstream institutions participating [that] have a strong predisposition for transparent, trusted, regulated dollar stablecoins,” Circle’s Allaire said.