On-chain data shows exchanges have continued to receive stablecoin deposits recently, a sign that could be bullish for Bitcoin and other digital assets.
Stablecoin Exchange Netflow Has Remained Positive Recently
As pointed out by an analyst in a CryptoQuant Quicktake post, stablecoins have been flowing into exchanges recently. The on-chain metric of relevance here is the “Exchange Netflow,” which keeps track of the net amount of a given asset that’s moving into or out of the wallets associated with centralized platforms.
When the value of this metric is positive, it means the investors are making net deposits of the coin to exchanges. Such a trend suggests the holders want to trade the asset away.
On the other hand, the indicator being negative implies investors prefer to hold onto the cryptocurrency, as they are taking their tokens off into self-custody. The implication of these trends for the wider sector and the asset itself can be different depending on the exact type of coin that’s witnessing the outflows/inflows.
In the case of volatile assets like Bitcoin, a positive Netflow can be bearish for the price, as it means the holders are looking to sell. BTC also acts as one of the main transition points for capital in the sector as a whole, so it being sold can be a bad sign for the rest of the coins as well.
Stablecoin deposits also imply traders want to sell them, but since their price always remains stable around the $1 mark, the selling has no ‘bearish’ effect on them.
Like Bitcoin, the stablecoins act as a gateway for capital into the sector. More particularly, investors invest their money into the stables whenever they want to avoid the volatility associated with other assets.
Such holders usually eventually plan to delve into the volatile coins, and once they are ready, they transfer these fiat-tied tokens into exchanges to make the swap. This naturally acts as buying pressure for whatever asset that they are shifting to. As such, positive stablecoin Exchange Netflows are considered bullish for Bitcoin.
Now, here is the chart shared by the quant that shows the recent trend in the Exchange Netflow for the stablecoins:
From the graph, it’s visible that the stablecoin exchange netflow has mostly been sitting inside the positive territory for the last few weeks. Alongside these inflows, Bitcoin has been breaking record after record, so it’s likely that these stablecoin deposits have been acting as fuel for the asset.
The indicator’s value has continued to show strength recently, so it seems the investors aren’t done with their BTC accumulation yet. If the earlier trend continues, the latest stablecoin inflows can elongate the rally and perhaps help the asset to finally break through the $100,000 dream target.
Bitcoin Price
Bitcoin had seen a plunge under the $96,000 level yesterday, but it appears the coin has already bounced back as its price is now trading around $98,400.
Featured image from Dall-E, CryptoQuant.com, chart from TradingView.com
