On-chain data shows the exchange recently acquired a large amount of stablecoin, something that could ultimately benefit the Bitcoin rally.
Stablecoin Exchange income has changed recently
As indicated by the analyst in the CryptoQuant Quicktake post, the Exchange Inflow of stablecoins has registered a sharp jump. “Exchange Inflow” here refers to an on-chain metric that keeps track of the total amount of a particular asset or group of assets transferred to wallets connected to an exchange.
If the value of this indicator is high, it means that investors are investing a large amount of asset tokens in these central platforms right now. Such a trend means that the demand for trade is high.
What this trend means in the wider field depends on the specific type of cryptocurrency or group of cryptocurrencies involved. In the case of volatile coins like Bitcoin, the entry of the exchange may have a bearish meaning, as it suggests that investors want to sell these assets.
With stablecoins like Tether’s USDT, exchange income also means that traders want to sell these tokens, but this has no effect on their prices as they are, by definition, stable around the $1 mark. This does not mean, however, that the exchange income stablecoin doesn’t work at all.
Investors often keep their money in these fiat-linked tokens when they want to avoid the volatility associated with Bitcoin and other assets. Usually, these managers end up planning to go back to the dynamic side, as they would choose fiat itself if they want to get out of the sector completely.
When stablecoin investors sense that the time is right to buy into Bitcoin and others, they transfer to the exchange to make the exchange. This can naturally have a bullish effect on the prices of the coins they switch to.
Exchanges seem to have received large deposits of ERC-20 stablecoins recently, as the Exchange Inflow data chart shows.
The value of the metric appears to have been quite high in recent days | Source: CryptoQuant
As seen in the graph above, the Exchange Inflow of all ERC-20 stablecoins recently saw a huge spike of $9.3 billion. This is the second largest index ever.
According to the number, most of these revenues went to only two platforms: Binance and Coinbase. Of the two, the former saw the biggest inflow at $4.3 billion (compared to $3.4 billion in the latter).
Considering that this entry came as the bullish mood pervaded the cryptocurrency market following the US presidential election, it is possible that they were designed for large purchases of Bitcoin and other assets.
In the chart, the analyst highlighted how the major stablecoin exchange inflow spikes occurred in the 2021 capital formation. It remains to be seen whether the latest spike will trigger a similar chain of events.
BTC price
At the time of writing, Bitcoin is trading around $74,800, up 4% over the past week.
Looks like the price of the coin has seen a notable rise recently | Source: BTCUSDT on TradingView
Featured image from Dall-E, CryptoQuant.com, chart from TradingView.com
Source link