On-chain analytics firm Santiment has explained how Tether (USD) and USD Coin (USDC) inflows preceded the recent Bitcoin rally.
Bitcoin Rally May Restart If Stablecoins See Further Exchange Deposits
In a new after on X, Santiment discussed the trend in the supply of exchanges of various assets in the cryptocurrency sector. The “exchange supply” is an indicator that tracks the percentage of the total circulating supply of the coin in question that is currently in the wallets of all centralized exchanges.
The chart below shows the trend in this indicator for Bitcoin (BTC), Ethereum (ETH), Chainlink (LINK), Polygon (MATIC), Tether (USDT) and USD Coin (USDC) over the past few months.
The data for the exchange supply of the different coins | Source: Santiment on X
Depending on the type of assets involved, the meaning of the offer on stock exchanges may differ. In the case of volatile assets like Bitcoin, the supply stored on these platforms can be considered the available sale supply of the asset, since one of the main reasons why investors can deposit their coins on the exchanges is to sell.
So when this indicator rises for these cryptocurrencies, it is a potential sign that selling pressure is increasing in the sector. The chart shows that Polygon has seen 0.7% of its supply move to the exchanges over the past month, which could be a bearish sign for the price.
On the other hand, Bitcoin has observed withdrawals equal to 0.33% of its supply over the same period. Such a drop in the indicator may indicate that investors may be participating in the accumulation, as they transfer their coins to their own wallets.
As for stablecoins, an increase in supply on exchanges also indicates that investors are looking to exchange these tokens. However, these stable sales actually create a buying impulse for the volatile side of the market, as investors can use these assets to move into Bitcoin and others.
As the chart shows, both Tether and USD Coin saw exchange supply increase between August and October. More specifically, USDT and USDC saw 3.54% and 0.72% of their supply move to these platforms, respectively. “These transfers were the precursor to the crypto-wide rally from late October to mid-November,” Santiment explains.
However, in the past month, 3.1% of Tether supply has left these platforms, while USD Coin has seen sideways movement. This could indicate that buying pressure is no longer increasing, and the opposite could happen.
“After a cooling-off period, the return of USDT and USDC to exchanges will be key to seeing market caps continue to rise over the last five weeks of 2023,” the analytics firm notes.
BTC price
Bitcoin has registered some pullback today as the asset’s price has now fallen below the $36,800 mark.
Looks like the asset has been going down recently | Source: BTCUSD on TradingView
Featured image of Kanchanara on Unsplash.com, charts from TradingView.com, Santiment.net