Stablecoin outflows affecting cryptocurrency prices?

Author: Michael Rinko

Original compilation: Biteye core contributor Crush

Original source: Biteye

How are stablecoin outflows affecting cryptocurrency prices? Is the market still a purely individual investor game? Today this article gives you the answer.

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

If we do regression analysis, we will find that the total market capitalization 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 the stablecoin and the price of Bitcoin, ranging from -1 to 1. -1 means 100% negative correlation, 1 means 100% positive correlation; the square of r represents the explanatory power , for example, it means that 47% of the current price of Bitcoin can be explained by the market value of stablecoins, and the rest may be caused by other reasons.)

It has a stronger correlation with Ethereum, r = 0.80, r^2 = 0.64. This is likely due to Ethereum’s remarkable decentralized finance ecosystem.

The market value of stablecoins has the strongest correlation with the total lock-up volume of defi, r= 0.80, r^ 2 = 0.65.

This makes sense, because most people enter defi through stablecoins, and more stablecoins mean more defi lockups.

Overall, there does not appear to be a clear sequential relationship between Bitcoin and stablecoin market capitalization. We can verify this by performing correlation analysis at different lags from -10 to 10 days. We find that the correlation between Bitcoin and stablecoin total market capitalization is highest at a lag of 0 days.

(Translator’s Note: The lag period here refers to moving the market value of the stablecoin forward by 10 days, 9 days, and 8 days in turn, until the data is pushed back by 10 days, and then the value of each day Carry out correlation analysis with the bitcoin price of the day, and calculate the r value to check whether there is a certain degree of temporal relationship or causal relationship between the two.)

If it is enlarged to a 180-day growth rate, we can see that in the last cycle, the market value of stablecoins led the rise of Bitcoin, but Bitcoin was ahead of stablecoins during the decline.

However, we should not put too much faith in this observed sequential relationship, since we only have one market cycle basis on which to base it.

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

In summary, what @Pentosh 1 said is correct, the entire market is still in a PVP game state, and once we see a large inflow of stablecoins, this may herald the return of more retail investors and risk appetites.

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