A variety of factors are propelling bitcoin this year, helping the largest cryptocurrency to a stellar year-to-date and a move about the psychologically important $30,000.
Among those catalysts is a spate of conversions of stablecoins into bitcoin. As the term implies, a stablecoin is a digital currency designed to offer investors price stability. That stability is derived from the coin’s “peg” to another asset, such as a fiat currency like the dollar or a commodity.
There are three primary categories of stablecoins: fiat-collateralized stablecoins, crypto-collateralized stablecoins, and non-collateralized stablecoins.
As CryptoSlate reports, recent data suggest there’s been an earnest rotation out of stablecoins into bitcoin, which is contributing to the latter’s ascent.
“The past few days have seen this resurgence start again, as highlighted by the sharp increase in the stablecoin supply ratio that coincided with the Bitcoin price above $30,000,” according to the publication.
It’s not clear which varieties of stablecoins are experiencing the most conversions to bitcoin, but amid rampant talk of dollar debasement and weakness in other fiat currencies, it’s possible some investors are parting with fiat-collateralized stablecoins in favor of bitcoin.
“Commodities such as gold can also be used here. The reserves are often maintained by custodians that function independently and are audited for compliance on a regular basis. Cryptocurrencies that are backed by dollar deposits include TrueUSD and Tether (USDT),” according to the Corporate Finance Institute.
Another catalyst for bitcoin in 2023 has been the reentry of so-called whales into the market. While definitions of what constitutes a bitcoin whale vary, prevailing wisdom indicates that a whale is defined as a wallet owning at least 1,000 bitcoin. What’s not up for debate is that whales typically transact in large enough amounts of bitcoin that these market participants affect the cryptocurrency’s price.
Data out last week indicate that bitcoin whales have recently been active in the market as the asset rallied above $30,000.
“Big whale moves have shown up on Bitcoin’s network today, as price is now on the verge of crossing $30,000 for the first time since June. A total of 11 separate 22,000 BTC [11 separate 2,000 BTC transactions worth 22,000 BTC] (a total of $655 million) were moved in two simultaneous batches,” according to Santiment. “As far as whether this rally can be sustained by the crowd, it certainly appears so now based on trading volume. However, we can see that address activity has been quite modest throughout Monday. So this adds to the theory that these 11 massive Bitcoin transactions had a lot to do with the edging to the celebratory level of $30k.”
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