On-chain data reveals a substantial influx of the stablecoin USDT into exchanges recently, which could be contributing to a broader Bitcoin and cryptocurrency surge.
USDT Exchange Inflows Have Remained High Recently
An analysis by the on-chain analytics firm Santiment highlighted a noteworthy trend in the Exchange Flow Balance for Tether’s USDT. This term refers to a metric that measures net inflows and outflows of a cryptocurrency at centralized exchange wallets.
When this balance is positive, it indicates that more of the asset is flowing into exchanges than leaving them, suggesting increased demand from investors eager to trade. Conversely, a negative balance shows that more tokens are being withdrawn, which points to a market accumulation phase.
A recent chart provided by Santiment indicates that the Exchange Flow Balance for USDT has seen significant positive spikes over the past month, implying that substantial investors are parking their tokens into exchanges.
For assets like Bitcoin, a positive Exchange Flow Balance can sometimes signal a bearish trend, as it could suggest holders are gearing up to sell. However, this logic doesn’t quite apply to stablecoins like USDT. Generally, investors use these fiat-pegged coins to sidestep the volatility associated with assets like Bitcoin, intending to transition back into more unstable options once market conditions favor them.
When investors convert USDT into Bitcoin or other cryptocurrencies, this action doesn’t impact USDT’s value significantly since it remains stable around the $1 mark. However, the value of the asset they are purchasing does fluctuate, making stablecoin inflows typically viewed as a positive indicator for prices of Bitcoin and other cryptocurrencies.
Over the past eight weeks, exchanges have averaged a net inflow of $40 million USDT daily. This influx is described as “fueling the current bullish momentum” and the numerous significant rallies in crypto, as noted by the analytics firm. They anticipate that the flow of stablecoin “dry powder” will maintain momentum as we approach the end of 2024.
Recently, Bitcoin reached a new all-time high, surpassing $108,000, although it has since experienced a pullback, now trading around $104,500.
The fluctuations in Bitcoin’s price along with the rising USDT inflows highlight the continuing dynamism in the crypto market. As more investors shift their capital into exchanges via stablecoins, the potential for further growth in Bitcoin and other cryptocurrencies remains a tantalizing possibility.
