As has become courtesy in the cryptocurrency industry, stablecoins are flowing to exchanges when Bitcoin moves up. There used to be a time when these pegged assets would push the price higher, but things appear a bit different today.
Traders Move Their Stablecoins Again
It has been a relatively quiet first month of 2021 for Bitcoin, despite the world’s leading cryptocurrency hitting $40,000 at one point. Thanks to the subsequent pullback and sideways trading, no one knows whether Bitcoin can reach that level again. If the inflow of stablecoins is any indication, that may be merely a matter of time. Exchange balances for these pegged assets are rising rapidly.
Judging by the chart below, the inflow is picking up steam. It clearly coincides with the recent Bitcoin price movements. After nearly two weeks of quiet trading, the market is firing on all cylinders once again. This is often a healthy sign for those waiting on the next bull market. Whether the price will remain near the current levels or face another pullback is anything but clear.
Currently, all major exchanges hold a combined reserve of nearly $5 billion in stablecoins. A substantial amount, and one that was seemingly impossible just a year or two ago. Today, the market looks very different and much healthier, even though the overall distrust toward stablecoins remains in place.
Assuming this is a sign of things to come, one can expect a lot of market momentum over the coming days. Ethereum has already hit a new all-time high in US Dollar value. Bitcoin is creeping closer to $37,000 again. Other markets note a mixed bag of significant gains or small losses, primarily due to altcoin/BTC ratios getting battered right now. That is the downside to a bullish Bitcoin price trend.
Stablecoin Transaction Count Picks Up
Coinciding with the increase in stablecoin exchange balances is a strong increase for transactions to exchanges. More specifically, this pertains to transfers involving the known and tracked stablecoins. None of this will be too surprising to people who have already seen one or two bull markets in the cryptocurrency industry.
While this increase may seem spectacular, it is less outspoken compared to earlier events. A much more substantial growth in stablecoin transactions is visible in October 2020 and June 2020. During those periods, people were more eager to deposit stablecoins on the various exchanges. A higher transaction count only tells part of the story, as the exchange balances were much lower back then.
From a long-term point of view, these developments are certainly intriguing. An increase in activity across the different stablecoins often signals an upcoming market trend. Whether it will affect Bitcoin or the many altcoins, is impossible to predict. Anything can happen in this industry, either for better or worse.