The crypto market is showing signs of recovery, with the Bitcoin price trying to regain the psychological $70,000 mark in recent days. Interestingly, the latest on-chain data suggests that the crypto market may actually have the required liquidity to spark a resurgence.
Stablecoin inflows increase during key support retest
In a recent QuickTake post on the CryptoQuant platform, market analyst CryptoOnchain said revealed a dramatic increase in TRC-20 USDT balances on Binance, the largest cryptocurrency exchange by trading volume. Citing data from CryptoQuant’s data, the on-chain analyst revealed that USDT reserves have increased from approximately $385 million on December 24 to approximately $5.2 billion on February 21.
What’s more interesting is that this spike of approximately $4.8 billion in stablecoin reserves on Binance all occurred within a month.
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The crypto expert highlighted that this significant increase in TRC-20 UDST reserves on Binance actually coincides with the price of Bitcoin and Ethereum approaching key support levels. This is typically a sign that demand is increasing and positioning activity is underway, often leading to absorbing selling pressure.
Typically, a significant increase in the accumulation of stablecoins on exchanges – especially during periods of price weakness – signals that liquidity is being rotated and not leaving the market completely. According to CryptoOnchain, this means more capital is being positioned for a possible return to the Bitcoin or Ethereum market (among other assets).
The use of TRC-20 indicates greater retail participation
The on-chain analyst further highlighted that TRC-20 USDT adoption is often characteristic of a certain investor class, known as retail participants. It is also common knowledge that large institutions – which generally do not pursue cost-efficient transactions – often use the ERC20 network.
Therefore, CryptoOnchain concluded that “the increase in TRC-20 reserves may indicate stronger retail involvement during the correction.”
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While stablecoin reserves indicate that market participants may be preparing for a bullish reversal in the Bitcoin price, it is worth noting that an immediate recovery is not guaranteed. This is because increased reserves only reflect the presence of inert demand (known as dry powder), rather than real demand.
Nevertheless, if current market conditions provide near-term stability, this “dry powder” waiting on the sidelines could quickly become fuel to drive prices higher. Furthermore, Bitcoin’s apparent demand has recently turned positive, suggesting a reversal is imminent.
At the time of writing, Bitcoin is valued at around $67,971, reflecting no significant movement in the past 24 hours.
Featured image from iStock, chart from TradingView