The growth of the market value and circulating supply of stablecoins has always been one of the best indicators to understand how market participants feel during bullish and bearish periods.
Monitoring tether (USDT) Reserve funds for a large number of issuances are a common strategy used by analysts and traders to position themselves in response to possible increases in the price of Bitcoin (Bitcoin) And altcoins, which used to be a good source of alpha for those willing to take risks.
A closer look at the data provided by CryptoQuant shows that as the issuance of USDT begins to stagnate, and the circulating supply of competitors such as USDT, the composition of the stablecoin market may be undergoing earth-shaking changes.USDC) The upward trend has resumed in the past week.
When looking at the exchange inflows and reserves of each stablecoin, the actual amount of USDC deposited in the exchange has increased, while the amount of USDT has decreased, leading to the stability of the total stablecoin reserve held by the exchange.
This is important because Tether printing has always been the driving force of major market trends, but its continued Legal challenge And related issues Reserve assets As regulators increasingly crack down on the wild west nature of the cryptocurrency market, holding tokens has become a burden.
As shown in the figure above, although the circulating supply of stablecoins has steadily increased in the first five months of 2021, and has accelerated with the market sell-off in May, due to the reality, the issuance volume stagnated at the beginning of June. A bearish trend has taken over the market.
There was also a surge in the number of stablecoin inflows that occurred on May 29, when the supply of stablecoins peaked, and then the price of BTC briefly rose to $40,000, and then another wave of selling dropped the price below $34,000 and stepped on anything. Building momentum.
Since then, the inflow of stablecoins to exchanges has fallen to the lowest level since October 2020. The Crypto Fear and Greed Index also recorded “extreme fear”, supporting the argument that retail investors and institutional investors lack demand.
As BTC approaches 30,000 USD, stablecoin inflows increase
Although there was a depletion period for stablecoin deposits on exchanges in June, the drought may end on June 21st, as the price of BTC fell below US$33,000, which seems to have induced stablecoin holders to consider buying on dips.
-Tempting beef (@tempting_beef) June 21, 2021
Whale Alert provides further evidence of USDC activity. Whale Alert is a well-known Twitter bot that released a large number of updates on USDC minting and transfers on June 21, as the cryptocurrency market experienced another round of selling.
— Whale Alert (@whale_alert) June 21, 2021
Normally, stablecoin inflows are considered bullish, and a recent newsletter from CryptoQuant issued a warning because of similar surges in stablecoin issuance in the past, followed by prolonged sideways trading or price drops.
“After the last bear market (2018-2019) bottomed out, we saw a steady rise in issuance events. At the top of this bullish period (June 28, 2019), there was a big issuance event (July-August 2019) The two big rises of the US are due to the issuance of USDT ETH). It looks like the same thing is happening now.”
The data warns that not all stablecoin issuances are predictors of Bitcoin price increases, because there are many factors that may lead to minting, such as institutional investors buying USDC for future purchases, and even altcoins and DeFi protocols are preparing to integrate USDC pairs. .
In the long run, this shift is likely to be beneficial to the crypto industry, because in the eyes of the government and regulators, audit projects like USDC are considered more legal, but USDT’s $62.67 billion market capitalization and its presence on crypto exchanges Universality means that any attempt to go to Tether may cause pain to the market.
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