Stablecoins Flow Into Spot Exchanges, Fueling Christmas Bitcoin Rally?

On-chain data shows that the number of stablecoin transactions entering spot exchanges has risen recently, which could help fuel a Christmas Bitcoin rally.

Stablecoin deposits to spot exchanges have seen increasing demand recently

As pointed out by an analyst in a CryptoQuant post, there has been a growing demand on spot exchanges recently. The relevant indicator here is the “stablecoin exchange deposit transactions”, which measures the total number of transfers involving these fiat-pegged tokens making their way to exchanges.

Investors typically use stablecoins when they want to escape the volatility associated with coins like Bitcoin. When the holders feel the prices are right to re-enter these volatile markets, they transfer their accumulated stables to exchanges to trade them into their desired cryptocurrency. So a large amount of these tokens entering exchanges can act as buying pressure for other markets, thus providing a bullish effect on the prices of Bitcoin and other assets.

Unlike the usual inflow metric, which simply measures the total amount flowing into exchanges, this indicator paints an idea of ​​the actual demand in the market since it counts individual transfers, which cannot be inflated by a few large investors as their transaction volume will be much lower than their inflow values.

Now, here’s a chart that shows the trend in this metric, as well as the reverse that keeps track of withdrawal transactions:

The value of the metric seems to have increased in recent days | Source: CryptoQuant

As the graph above shows, the stablecoin exchange transaction value has observed some growth recently, and at the same time, the withdrawal transactions have decreased instead. This means that there is demand to buy with stable right now, while there is not much interest in exiting volatile markets using these fiat-linked tokens.

Such a situation has proven to be bullish for the price of Bitcoin in recent months, as the previous instances of this trend in the chart show. “With the increasing number of stablecoin deposits and decreasing number of stablecoin withdrawals, the capitulation events may reach the end,” notes the quant.

The analyst believes these cues could fuel another rally, saying “such a rebound in sentiment for private investors could potentially lead to a Christmas rally.” It now remains to be seen whether these stablecoin inflows will prove to be constructive for the price this time around or not.

Looks like BTC has observed a decline in the last few days | Source: BTCUSD on TradingView

At the time of writing, Bitcoin’s price is hovering around $16,900, down 1% in the past week.