What’s Driving Bitcoin? Innovation and the Growth in Stablecoins

The recent strength in Bitcoin is puzzling. The speculative excesses in financial markets are easing, yet Bitcoin remains strong. Institutional demand is cooling, yet Bitcoin remains strong. Even the on-chain metrics are slowing, as I discussed last week, yet Bitcoin remains strong.

  • Bitcoin doesn’t pay a yield. No problem — we’ll build DeFi. You can freely lend and borrow crypto assets. You can even return 8% per annum on a USD stable coin.
  • The regulators want KYC and AML checks. No problem — dozens of solutions will confirm identities at the touch of a button.
  • It’s hard to deal with the banks. No problem — introducing stablecoins.

Rising bond yields

The Fed, along with other governments, are spending like 1970s rock stars. As victory in the battle against this tedious real-world virus is within sight, the world economy is accelerating. This benefits the old world as the planes and restaurants fill up again.

Bitcoin still likes a rising bond yield

Source: Bloomberg. Bitcoin and the US 10-year bond yield past year.

Show me the growth

Probably the most bullish case for Bitcoin is that it is an open-source project that is fuelled by innovation. But I would expect that growth to be reflected by increased on-chain activity. But as I showed you last week, that has stalled. Despite the price finding its way to new highs, on-chain activity has not budged.

On-chain network value transfer is back to January levels

Source: ByteTree Terminal. Total transaction value transferred over the Bitcoin Network, vs price, 1-week cumulative rolling, since April 2020 to date.
Source: ByteTree Asset Management.

Google search “buy bitcoin”

Source: Google.


Stablecoins have driven the long-standing issues between digital asset companies and traditional banks to the side-line. Demand for digital FIAT, i.e. stablecoins, has grown exponentially over the past year. Tether’s name is being cleared, and the adoption of digital assets amongst large institutions, such as VISA and Circle’s USDC, has certainly helped.

Applied data for digital asset investors. ByteTree provides real-time data, fundamentals, technical and deep blockchain market analysis for Bitcoin, and more.

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