Exchanges Receive 2nd Largest Stablecoin Inflows Ever: Fuel For Bitcoin?

2 weeks ago 16

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On-chain data shows the exchanges have just received large stablecoin inflows, something that could end up benefiting the Bitcoin rally.

Stablecoin Exchange Inflows Have Spiked Recently

As pointed out by an analyst in a CryptoQuant Quicktake post, the Exchange Inflow for stablecoins has registered a sharp jump. The “Exchange Inflow” here refers to an on-chain metric that keeps track of the total amount of a given asset or group of assets being transferred to wallets connected to exchanges.

When the value of this indicator is high, it means the investors are depositing a large number of tokens of the asset to these centralized platforms right now. Such a trend implies demand for trading away the coin is high.

What this trend means for the wider sector depends on the exact kind of cryptocurrency or group of cryptocurrencies that’s involved. In the case of volatile coins like Bitcoin, exchange inflows can have a bearish implication, as it suggests investors want to sell these assets.

For stablecoins like Tether’s USDT, exchange inflows also imply 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 doesn’t mean, however, that stablecoin exchange inflows have no relevance at all.

Investors usually store their capital in these fiat-tied tokens when they want to avoid the volatility associated with Bitcoin and other assets. Generally, these holders eventually plan to buy back into the volatile side, since they would have chosen fiat itself if they wanted to exit the sector entirely.

When the stablecoin investors feel the time is right to buy into Bitcoin and others, they transfer to exchanges to make the swap. This can naturally have a bullish effect on the prices of the coins that they are shifting to.

Exchanges appear to have received massive deposits of the ERC-20 stablecoins recently, as the chart for the Exchange Inflow data shows.

Stablecoin Exchange Inflows

The value of the metric appears to have been quite high in recent days | Source: CryptoQuant

As is visible in the above graph, the Exchange Inflow for all ERC-20 stablecoins has just seen a huge spike of $9.3 billion. This is the second largest that the indicator has ever been.

According to the quant, the majority of these inflows went to just two platforms: Binance and Coinbase. Out of the two, the former saw the larger inflows at $4.3 billion (versus $3.4 billion for the latter).

Given that these inflows have come as bullish atmosphere has engulfed the cryptocurrency market following the US presidential elections, it’s possible that they have been made for making large purchases of Bitcoin and other assets.

In the chart, the analyst has highlighted how large stablecoin Exchange Inflow spikes also occurred in the build-up to the 2021 bull run. It now remains to be seen whether the latest spike would also kickoff a similar chain of events.