Stablecoin inflows to exchanges dip as traders watch Bitcoin from the sidelines
Despite a 5% increase in the number of Bitcoin Cash (BCH) trading pairs on exchanges, inflows to these trading platforms have slowed down in recent weeks. Data from CoinMarketCap shows that the BTC:BCH market share ration has fallen to a new low of 0.51% at the time of writing, from a high of just over 1% at the start of November.
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Over the past year, we noticed that the cryptocurrency market overall has grown, but even more so, the number of stablecoin investors has been on the rise. At the beginning of 2018, the number of stablecoin investors was at close to $10 billion, according to CoinMarketCap, while the total market cap of stablecoins reached $50 billion.
Emerging stablecoins are a thing at the moment, as investors are betting that the market for them is here to stay. Today, the top stablecoins in terms of market cap are Tether and TrueUSD, which are both backed by fiat reserves. But there are other stablecoins in the works too—although these are mostly in the form of tokens instead of a stable coin that is pegged to the value of a fiat currency.. Read more about glassnode bitcoin on exchanges and let us know what you think.
The increase in the market value and supply of stablecoin in circulation is one of the best indicators to get a general idea of how market participants feel during bullish and bearish periods.
Keeping an eye on Tether (USDT) shares ahead of major issues has been a common tactic used by analysts and traders to position themselves for a potential jump in Bitcoin (BTC) and Altcoin prices, and it has been a good source of alpha for those willing to take risks.
Circulation feedUSDT. Source: CryptoQuant
A closer look at CryptoQuant’s data suggests that there may be a seismic shift in the structure of the stablecoin market, with USDT issuance beginning to stagnate while circulating supply from competitors such as USD Coin (USDC) resumed its upward trend last week.
In fact, if we look at the inflows to the exchange and the reserves of individual Stabelcoins, we see an increase in the number of USDCs placed on the exchanges, while the number of USDTs has decreased, leading to a plateau in the total reserves of Stabelcoins held on the exchanges.
USDC circuit power supply. Source: CryptoQuant
This is important because the Tether seal has been responsible for large market movements in the past, but ongoing legal issues and questions about assets held in reserve have made owning the token more dangerous as regulators increasingly clamp down on the wild nature of the crypto-currency market.
All stablecoin reserves on exchanges. Source: CryptoQuant
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As the chart above shows, the tradable supply of Stablcoins increased steadily in the first five months of 2021, with a slight acceleration when the market dropped off in May, but issuance came to a halt in early June when it became clear that the market was in a downward trend.
Moreover, a spike in the number of transactions was recorded with the influx of Stablcoin on the 29th. May was related, just when Stablcoin’s bidding peaked, after which BTC briefly climbed to $40,000 before another wave of selling brought the price back below $34,000 and removed any upside momentum.
Count all transactions by entering stable coins in exchanges. Source: CryptoQuant
Inflows of stablecoins to the exchanges have since fallen to their lowest level since October 2020. The Fear and Greed Index for cryptocurrencies also registers extreme fear, supporting the argument that there is a lack of demand among retail and institutional investors.
Cryptocurrency Fear and Greed Index. Source: Alternative.me
Stablecoin inflows rise as BTC approaches $30,000
While there was a drought of Stablecoin deposits on exchanges in June, the drought could be news on the 21st. June is coming to an end, as the drop in the price of BTC below $33,000 seems to have made stablecoin holders think twice before buying them.
#Bitcoin shows signs of life, steady coin flow is coming.
Don’t say anything, you’ll scare him off! pic.twitter.com/HrWtizpKJO
– Tempting Beef (@tempting_beef) June 21, 2021
Further evidence of USDC activity was provided by Whale Alert, a well-known Twitter bot, posted on the 21st. In June, as the cryptocurrency market experienced another round of declines, numerous updates on USDC mining and transfers were published.
76,672,444 #USDC ($76,672,444) minted at Treasury USDChttps://t.co/v4OLyuuJE2
– Whale Alert (@whale_alert) June 21, 2021
Normally, Stabelcoin inflows are considered positive, but a recent newsletter from CryptoQuant urges caution, as these spikes in Stabelcoin issuance have historically been followed by a long period of sideways trading or price declines.
All events related to the issue of stable coins. Source: CryptoQuant
Since the low point of the last bear market (2018-2019), we have seen a steady increase in issue events. At the peak (June 28, 2019) of this bullish period, a major issuance event occurred (two major peaks in July-August 2019 are associated with USDT-ETH issuances). The same thing seems to be happening now.
Related: Institutional sales cryptocurrencies reach longest streak since February 2018.
This data serves as a warning that not all stablecoin issuance is an indicator of bitcoin price growth, as there are a number of factors that can explain mining, such as institutional investors buying USDC for future purchases, or even altcoin and DeFi protocols preparing to include USDC pairs.
In the long run, this change could benefit the cryptocurrency industry, as verified projects like USDC are seen as more legitimate in the eyes of governments and regulators, but the sheer size of USDT’s $62.67 billion market cap and its ubiquity on cryptocurrency exchanges means that any attempt to repeal tethering is likely to hurt the market.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Cointelegraph.com. Every investment and every transaction involves risk. So you need to do your own research before making a decision.Bitcoin’s dominance is on the rise, and the cryptocurrency’s (relative) stability is now attracting the attention of established investors and stablecoin enthusiasts. While Bitcoin’s dominance has risen to 47.5%, it remains a long way from the heights it reached in the early days of 2017, when the currency was the only game in town.. Read more about bitcoin leaving exchanges chart and let us know what you think.
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