Bitcoin got off to a modest start in May, with the flagship cryptocurrency rising as much as 3.5% on Friday. At the time of writing, the leading cryptocurrency is trading near $78,400, with little movement over the past day. Interestingly, a market expert has explained how a perceived shift in Bitcoin investor behavior could have a major impact on the cryptocurrency’s sluggishness.
Buying Power On Binance Fades After Bitcoin Rally
Crazzyblockk, in one QuickTake post on the CryptoQuant platform, marked a dynamic shift among Bitcoin investors is over the past few days. The relevant indicator cited here is the Binance Stablecoin Netflow (USD) metric.
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For context, the metric tracks the net number of stablecoins entering or leaving Binance, indicating whether purchasing power is increasing (inflows) or withdrawing (outflows) from the exchange.
According to Crazzyblockk, Binance (the largest exchange in the world by trading volume) had recorded significant amounts of net inflows daily from April 14 to 22. During this period, Binance saw daily inflows of $548 million to $1.14 billion in new stablecoins.
Interestingly, this consistent stream of inflows corresponded with Bitcoin’s recovery from $74,000 to $78,000. The crypto expert noted that this is a sign of “accumulation of purchasing power on Binance.”
However, this flow of stablecoin inflows appears to have come to an end – an event that could in turn cause the rally to gradually lose steam. By extension, this could be a sign of a potential sentiment shift, as bearish pressure could quickly emerge at major resistance levels (as is currently the case).
Binance has been recording $1.54-$1.78 billion in outflows per day since April 28
On the other hand, investors weren’t just holding back their liquidity; They may also be showing signs of a sentiment shift. As of April 28, Binance has seen stablecoin outflows for five consecutive days, ranging from $1.54 billion to $1.78 billion per day.
According to Crazzyblockk, a similar heavy sell-off of stablecoins has not been seen in the Bitcoin market since January 26. The last time this happened, daily outflows were $3.2 billion, while the market leader was trading near $89,500.
Notably, this period was followed by a decline of around 15% in the price of BTC before eventually stabilizing around $76,000. Crazzyblockk further explained that this is due to a simple mechanism that repeats itself on a smaller scale: “the stablecoin reserves built up, fueled a rally, and then depleted as the cycle exhausted itself.”
If stablecoin netflows on Binance fail to return to the ‘inflow’ side, Bitcoin could face significant downside risk. To reduce this risk, Crazzyblockk explained that new capital, in the form of stablecoins, should return to the exchanges, especially to Binance.
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Featured image from iStock, chart from TradingView