A recent analysis from the on-chain analytics firm Santiment has shed light on a notable correlation between the inflows of prominent stablecoins to exchange wallets and the surge in Bitcoin’s market activity. Specifically, Tether (USDT) and USD Coin (USDC) have been at the forefront, leading up to the crypto rally that has been making headlines.
Stablecoins such as USDT and USDC are typically seen as a safe haven or a parking spot for traders looking to escape the market’s volatility. However, their movement into exchanges can signal a preparatory step for market participants to convert these stable assets into more volatile ones like Bitcoin, possibly igniting a rally in the crypto market.
Within the fluctuating currents of the digital asset landscape, the ‘supply on exchanges’ indicator stands out as a beacon. This metric tracks what percentage of a cryptocurrency’s total circulating supply is housed within centralized exchange wallets. A surge in this figure can hint at a potential spike in selling pressure, as investors may be looking to offload their holdings.
For volatile assets like Bitcoin, a reduction in the supply on exchanges, as evidenced by the removal of 0.33% of Bitcoin’s supply from these platforms in a recent period, could signify a bullish sentiment among investors. This decreased exchange presence might suggest a trend towards accumulation, with investors opting to shift their holdings to personal wallets, away from the immediate reach of the market’s ebb and flow.
Conversely, an increase in exchange supply for stablecoins tells a different story. When the aggregate volume of USDT and USDC on exchanges rose noticeably from August to October, it acted as a precursor to the uptick in the crypto market. Santiment points out a 3.54% and 0.72% exchange inflow for USDT and USDC respectively, as the prelude to the flourishing market seen from late October to mid-November.
Looking at the more recent trends, there’s been a substantial 3.1% outflow of Tether from exchanges, while USD Coin’s supply on these platforms has plateaued. This could hint at a pause in the buying momentum, and suggests the possibility of a market downturn.
For Bitcoin’s price movement, it’s come under scrutiny as the value dips below the $36,800 threshold, marking a potential concern for those tracking the cryptocurrency’s course. The analytics firm magnifies the importance of stablecoin movements, forecasting that a resurgence of USDT and USDC back into exchange wallets might be pivotal to stir the market in the remaining weeks of 2023, hoping to boost the market caps once again.
