Exchanges See Large Stablecoin Inflows, What Does It Mean for Bitcoin?
Data on the chain shows that exchanges have observed large stable coin inflows recently. Here’s what this could mean for the price of Bitcoin.
Stablecoin Exchange Netflow has shown a positive peak recently
As pointed out by an analyst in a CryptoQuant post, the latest stablecoin deposits are the highest observed this year so far. The relevant indicator here is “stablecoin exchange netflow”, which measures the net amount of stablecoins moving into or out of the wallet of all centralized exchanges. The metric’s value is simply calculated by taking the difference between inflows and outflows.
When the value of this metric is greater than zero, it means that the inflows taking place at the moment are higher than the outflows, thus a net number of tokens are deposited on these platforms. On the other hand, negative values suggest that investors are making withdrawals right now.
Since stablecoins are tied to fiat currencies, their values are generally stable (hence the name). Thus, investors trade into these tokens when they want to escape the volatility associated with coins like Bitcoin.
When such holders eventually feel that the prices are right to jump back into the volatile coins, they simply convert their stable back into the desired cryptocurrency, putting buying pressure on the prices.
Investors typically use exchanges to make moves like these, so the net flow can tell us what behavior is most dominant at the moment. Naturally, positive values of the indicator suggest that these holders are buying coins such as Bitcoin with their stablecoins at the moment, while negative values may indicate that sales are in progress.
Now, here’s a chart showing the trend in stablecoin exchange net flows over the past few months:
Looks like the value of the metric has been pretty high in recent days | Source: CryptoQuant
As shown in the graph above, the stablecoin exchange’s net flow has observed a very high positive peak recently. This means that a large amount of these tokens have been deposited into exchanges.
With nearly $10 billion worth of stables flowing into these platforms, this latest spike in the indicator was the largest seen during the year 2023 so far.
Interestingly, this large deposit has come after the price of Bitcoin has seen a steep drop, which could indicate that investors can use stablecoins to buy the cryptocurrency while its value is at a potential discount.
If the recent positive stablecoin exchange net flow is indeed a sign that holders are putting buying pressure on coins like Bitcoin, the prices of the cryptocurrencies they trade into could observe a bullish effect from this.
Bitcoin price
At the time of writing, Bitcoin is trading around $22,400, down 4% in the last week.
The value of the asset seems to have plunged recently | Source: BTCUSD on TradingView
Featured image from Traxer on Unsplash.com, Charts from TradingView.com, CryptoQuant.com
