Bitcoin Breaks Above $24,000 As Stablecoin Inflows Explode
Bitcoin broke the $24,000 mark in the past 24 hours as on-chain data shows a spike in stablecoin exchange inflows.
The flow of stablecoins to the exchange has recently increased
As a CryptoQuant analyst points out mail, most likely, now there is a demand on the market from institutional investors. The relevant indicator here is “average stablecoin inflow”, which measures the average number of stablecoins that are currently listed on the wallets of centralized exchanges.
When the value of this metric is high, it means that the average number of stablecoin tokens entering exchanges is now quite high, suggesting the participation of large players.
Investors usually convert their coins into stables to avoid the volatility associated with assets like Bitcoin. When these holders eventually feel that prices should return to volatile markets, they usually move their stablecoins to exchanges to exchange them for their desired coins.
This transfer to cryptocurrencies such as Bitcoin could have a bullish effect on their prices. Thus, whenever the influx of stablecoins increases, there is a possibility that asset prices in this sector may rise.
A metric similar to the average exchange inflow is the average exchange outflow, which naturally measures the average number of stables leaving these platforms.
Now here is a chart showing the trend of the 7-day moving averages (MA) of these two stablecoin indicators over the last couple of years:
Looks like the 7-day MA values of the metrics have been elevated in recent days | Source: CryptoQuant
As shown in the chart above, the stablecoin exchange’s 7-day moving average inflow and outflow averages have been quite high lately, but the previous spike was much higher.
A large inflow (or outflow) means that many individual transactions must be of fairly large amounts (otherwise the average would be low), implying the presence of institutional investors in the market.
However, these indicators alone do not confirm how large this presence is, since the average inflow value can be easily skewed by a few large investors if the total number of inflow transactions is itself small.
To test this, there are two other metrics: “exchange deposit transactions” and “exchange withdrawal transactions”. The chart below shows the dynamics of these indicators for stablecoins, as well as how they clearly affected the price of bitcoin over the past two years.
Only one of the metrics seems to have been at high levels recently | Source: CryptoQuant
From the graph, it can be seen that the number of deposit transactions on the stablecoin exchange has been high recently, while the number of withdrawal transactions has been low. The fact that the average inflow is still high despite such a large number of transactions can confirm that there is currently decent demand from institutions.
Quant also noted on the chart what happened to the price of bitcoin when such a trend historically formed. It looks like this demand to convert stables (and there is no demand to withdraw them) has generally had a bullish effect on the price.
Indeed, since the last formation of this trend, BTC has also seen a strong upward momentum and has broken the $24,000 mark.
At the time of writing, Bitcoin is trading around $24,600, up 8% over the past week.
BTC has sharply surged in the past 24 hours | Source: BTCUSD on TradingView
Credit : www.newsbtc.com