While much attention has been focused on the demand for spot bitcoin exchange-traded funds (ETFs) to assess the trajectory of digital asset prices, 10x Research suggests that monitoring the stablecoin supply could offer a more insightful indicator for crypto demand. According to Markus Thielen, founder of 10x Research, stablecoin issuers are now the driving force behind market growth.

Stablecoins, digital assets pegged predominantly to the U.S. dollar, play a pivotal role in bridging traditional fiat currencies with the digital asset realm, providing liquidity for trading. Changes in stablecoin supply serve as a crucial barometer for the crypto market's health, as market participants mint stablecoins by depositing fiat currency, as outlined in the 10x report.

Over the past 30 days, the supply of the two largest stablecoins, Tether's USDT and Circle's USDC, surged by nearly $10 billion combined, as highlighted by 10x Research. Additionally, the supply of MakerDAO's DAI and Hong Kong-based First Digital's FDUSD, the third and fourth largest stablecoins, expanded by 5% to 10% in the same period, according to CoinGecko data. Notably, USDT alone witnessed a $2.4 billion increase in just one week, marking one of the highest 7-day increments during this bull market.

Thielen emphasized that the surge in stablecoin supply underscores an accelerated movement of fiat money into the crypto sphere.

In contrast, U.S.-based spot bitcoin ETFs attracted $5 billion in net inflows over the past 30 days, as outlined in the report. However, Thielen noted that stablecoin minting outpaced ETF inflows and might represent long-only exposure, contrary to ETFs.

Thielen explained that ETF inflows could be influenced by market participants seeking to profit from elevated futures funding rates through a "carry trade." Funding rates, which denote payments to traders based on the price difference between futures contracts and spot markets, have reached near-record highs. Savvy investors capitalize on this by buying spot BTC or ETF shares while simultaneously selling equal-sized BTC futures to pocket the price difference as yield.

Notably, Thielen pointed out that hedge funds held record amounts of BTC futures short positions on the regulated Chicago Mercantile Exchange, possibly due to heightened demand for the carry trade, as highlighted in another 10x report last week.