Stablecoin inflows to exchanges spike as traders prepare for spot Bitcoin ETF decision

    2024.01.10 | exchangesranking | 64onlookers

    Data shows an uptick in stablecoin inflows amid renewed bullish action in the crypto market fueled by the expectation of a spot Bitcoin (BTC) exchange-traded fund (ETF) approval in the United States. 

    The trend of Tether (USDT) and USD Coin (USDC) flooding exchanges suggests that traders are possibly preparing to enter the market depending on their spot ETF expectations.

    According to market data provider CryptoQuant, stablecoin holdings in known crypto exchange wallets rose from $18.05 billion on Jan. 1 to surpass $19.99 billion on Jan. 7.

    The total stablecoin market capitalization is estimated at around $133.4 billion at the time of writing, according to data from CoinMarketCap.

    The total trading volume of all stablecoins is now evaluated at around $70 billion, with Tether alone making up $55.86 billion of these volumes.

    All stablecoin reserves on exchanges. Source: CryptoQuant

    A closer look at the data provided by CryptoQuant reveals that while the stablecoin holdings on crypto exchanges rose sharply during the first eight days of 2024, the amount of inflow stablecoin transactions also appears to have grown in tandem with the growth in BTC price.

    On Jan. 8, when Bitcoin price flashed above $47,000, the number of inflow stablecoin transactions amounted to nearly 33,000, up from 22,900.

    All stablecoins inflow transaction count to exchanges. Source: CryptoQuant

    The growth of the stablecoin market cap and stablecoin inflows and outflows to exchanges has historically been a good indicator for attaining a general pulse on how participants are positioned in the market.

    Accelerated by the possibility of the first-ever spot Bitcoin ETF being approved by the SEC — whose decision deadline is Jan. 10 — stablecoin exchange inflows continued to increase at the beginning of January as the reality set in that a bullish trend was taking over the market.

    As previously reported by Cointelegraph, the start of Bitcoin’s rally in October 2020 was driven by growing stablecoins’ inflows into exchanges.

    Related: Bitcoin short ETPs record $1M weekly outflow, anticipating spot BTC ETF approval

    The Crypto Fear and Greed Index also registers “extreme greed,” backing up the argument that there is increased demand from retail and institutional investors.

    Cryptocurrency fear and greed index. Source: Alternative.me

    Stablecoin inflows rise as traders expect a “bullish Bitcoin ETF outcome”

    Large stablecoin inflows are often regarded as a short-term catalyst for Bitcoin price action, suggesting that sidelined capital is moving back into BTC.

    Further evidence of activity for stablecoins was provided by independent analyst Cole Garner, who posted the following chart highlighting the increasing stablecoin market capitalization ratio, which supports “a bullish #Bitcoin ETF outcome.”

    As such, growing stablecoin allocations on crypto exchanges may be a sign that traders are gearing up for market volatility during the Jan. 10 window for the SEC to issue a final decision on a spot Bitcoin ETF.

    At the time of writing, Bitcoin is trading at $46,715, up 0.87% over the last 24 hours, according to data from CoinGecko.

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