On-chain data shows exchanges have observed large stablecoin inflows recently. Here’s what this may mean for the price of Bitcoin.
Stablecoin Exchange Netflow Has Shown A Positive Spike 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 the “stablecoin exchange netflow,” which measures the net amount of stablecoins that are moving into or out of the wallets of all centralized exchanges. The metric’s value is simply calculated by taking the difference between the inflows and outflows.
When the value of this metric is greater than zero, it means the inflows taking place are currently higher than the outflows, and thus a net number of tokens is being deposited into these platforms. On the other hand, negative values imply investors are making withdrawals right now.
As stablecoins are tied to fiat currencies, their values are generally stable (hence the name). Thus, investors swap into these tokens whenever they want to escape the volatility associated with coins like Bitcoin.
When such holders eventually feel that prices are right to jump back into the volatile coins, however, they simply convert their stables again into their desired cryptocurrencies, providing buying pressure on their prices.
Investors usually use exchanges for making moves like these so the netflow can tell us which behavior is more dominant currently. Naturally, positive values of the indicator suggest these holders are buying coins like Bitcoin with their stablecoins at the moment, while negative ones may imply selling is going on.
Now, here is a chart that shows the trend in the stablecoin exchange netflow over the last few months:
Looks like the value of the metric has been pretty high in recent days | Source: CryptoQuant
As shown in the above graph, the stablecoin exchange netflow has observed a very high positive spike recently. This means that a large amount of these tokens have been deposited into exchanges.
Totaling almost $10 billion worth of stables flowing into these platforms, this latest spike in the indicator was the largest that has been seen during the year 2023 so far.
Interestingly, this large deposit has come after the price of Bitcoin has seen a steep plunge, which may suggest that investors could be using their stablecoins to buy the cryptocurrency while its value is at a potential discount.
If the latest positive stablecoin exchange netflow is indeed a sign that the holders are applying buying pressure on coins like Bitcoin, then the prices of the cryptocurrencies that they are swapping into may observe a bullish effect from this.
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