On-chain data shows the exchanges have just received large stablecoin inflows, something that might find yourself benefiting the Bitcoin rally.
Stablecoin Exchange Inflows Have Spiked Recently
As identified by an analyst in a CryptoQuant Quicktake post, the Exchange Inflow for stablecoins has registered a pointy jump. The “Exchange Inflow” here refers to an on-chain metric that keeps track of the whole amount of a given asset or group of assets being transferred to wallets connected to exchanges.
When the worth of this indicator is high, it means the investors are depositing numerous tokens of the asset to those centralized platforms straight away. Such a trend implies demand for trading away the coin is high.
What this trend means for the broader sector is dependent upon the precise type of cryptocurrency or group of cryptocurrencies that’s involved. Within the case of volatile coins like Bitcoin, exchange inflows can have a bearish implication, because it suggests investors wish to sell these assets.
For stablecoins like Tether’s USDT, exchange inflows also imply traders wish to sell these tokens, but this has no effect on their prices as they’re, by definition, stable across the $1 mark. This doesn’t mean, nonetheless, that stablecoin exchange inflows haven’t any relevance in any respect.
Investors often store their capital in these fiat-tied tokens after they wish to avoid the volatility related to Bitcoin and other assets. Generally, these holders eventually plan to purchase back into the volatile side, since they’d have chosen fiat itself in the event that they desired to exit the sector entirely.
When the stablecoin investors feel the time is true to purchase into Bitcoin and others, they transfer to exchanges to make the swap. This may naturally have a bullish effect on the costs of the coins that they’re shifting to.
Exchanges appear to have received massive deposits of the ERC-20 stablecoins recently, because the chart for the Exchange Inflow data shows.
The worth of the metric appears to have been quite high in recent days | Source: CryptoQuant
As is visible within the above graph, the Exchange Inflow for all ERC-20 stablecoins has just seen an enormous spike of $9.3 billion. That is the second largest that the indicator has ever been.
In keeping with the quant, the vast majority of these inflows went to only two platforms: Binance and Coinbase. Out of the 2, the previous saw the larger inflows at $4.3 billion (versus $3.4 billion for the latter).
On condition that these inflows have come as bullish atmosphere has engulfed the cryptocurrency market following the US presidential elections, it’s possible that they’ve been made for making large purchases of Bitcoin and other assets.
Within the chart, the analyst has highlighted how large stablecoin Exchange Inflow spikes also occurred within the build-up to the 2021 bull run. It now stays to be seen whether the most recent spike would also kickoff an identical chain of events.
BTC Price
On the time of writing, Bitcoin is trading at around $74,800, up 4% over the past week.
Looks like the worth of the coin has seen a notable rise recently | Source: BTCUSDT on TradingView
Featured image from Dall-E, CryptoQuant.com, chart from TradingView.com