On-chain data shows that exchanges just received large inflows of stablecoins, which could end up benefiting the Bitcoin rally.
Stablecoin exchange flows have increased recently
As an analyst pointed out in a CryptoQuant Quicktake article, trading flow for stablecoins has seen a sharp increase. “Exchange flow” here refers to an on-chain metric that tracks the total amount of a given asset or group of assets transferred to exchange-connected wallets.
When the value of this indicator is high, it means that investors are currently depositing a large number of tokens of the asset on these centralized platforms. Such a trend implies that the demand for coin trading is high.
What this trend means for the industry as a whole depends on the exact type of cryptocurrency or group of cryptocurrencies involved. In the case of volatile coins like Bitcoin, exchange flows can have a bearish implication, as it suggests that investors want to sell these assets.
For stablecoins like Tether’s USDT, exchange inflows also imply 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 stablecoin trading flows are irrelevant.
Investors typically store their capital in these fiat tokens when they want to avoid the volatility associated with Bitcoin and other assets. Typically, these holders ultimately consider repurchasing on the volatile side, as they would have chosen fiat itself if they wanted to exit the sector entirely.
When stablecoin investors feel the time is right to buy Bitcoin and others, they turn to exchanges to make the trade. This can naturally have an upward effect on the prices of the coins they are moving towards.
Exchanges appear to have recently received massive deposits of ERC-20 stablecoins, as seen in the Exchange Inflow data chart.
The value of the metric appears to have been quite high in recent days | Source: CryptoQuant
As the chart above shows, trade flows for all ERC-20 stablecoins just saw a massive spike of $9.3 billion. This is the second largest indicator ever.
According to the quant, the majority of these flows went to just two platforms: Binance and Coinbase. Among the two, it is the first which recorded the largest inflows, i.e. 4.3 billion dollars (compared to 3.4 billion dollars for the second).
Given that these flows came as a bullish atmosphere engulfed the cryptocurrency market following the US presidential elections, it is possible that they were made to make large purchases of Bitcoin and other assets.
In the chart, the analyst highlighted how significant spikes in stablecoin exchange inflows also occurred in the build-up to the 2021 bull run. It now remains to be seen whether the latest spike would also trigger a similar chain of events.
BTC Price
At the time of writing, Bitcoin is trading at 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 of Dall-E, CryptoQuant.com, chart from TradingView.com
