Is a brand new rally brewing as Bitcoin reclaims $38K and stablecoins 'flooding' exchanges?

The value of Bitcoin (BTC) has prolonged its restoration on Jan. 14, reclaiming the $38,000 degree. What’s extra, the weekly candle has now turned inexperienced for the fifth consecutive week regardless of the 28% crash earlier this week. 

BTC/USD Weekly candle chart (Bitstamp). Supply: Tradingview

In the meantime, stablecoin deposits are flooding into cryptocurrency exchanges, in keeping with knowledge from CryptoQuant. This influx could act as a short-term catalyst for Bitcoin because it means that sidelined capital is shifting again into BTC.

Stablecoins influx on exchanges. Supply: CryptoQuant

Why are stablecoins indicative of sturdy purchaser demand for Bitcoin?

Within the cryptocurrency market, many merchants promote crypto property, like Bitcoin, to stablecoins somewhat than money.

Stablecoins, reminiscent of Tether (USDT), is pegged to the worth of the U.S. greenback and are tradable throughout exchanges.

Most exchanges require a sophisticated Know Your Buyer (KYC) verification course of for financial institution transfers, and money deposits into exchanges may take a very long time.

As such, if a whale or a high-net-worth investor desires to purchase and promote hundreds of thousands of {dollars} value of Bitcoin, stablecoins will be much more handy than money.

The excessive demand for stablecoins from merchants has led the valuation of Tether to extend in latest months. Final month, the market cap of Tether surpassed $20 billion. A month later, this quantity is already above $24 billion, indicating an increase in sidelined capital throughout the cryptocurrency market.

Dry powder shifting to exchanges

In the meantime, stablecoin deposits into exchanges have elevated considerably over the previous 24 hours. CryptoQuant tracks the wallets of exchanges and observes stablecoin deposits and outflows.

Exchanges’ stablecoin reserve. Supply: CryptoQuant

Throughout main exchanges, stablecoin deposits spiked noticeably on Jan. 13, proper as the worth of Bitcoin started to get better.

On Jan. 13, the worth of Bitcoin dropped to as little as $32,500 after almost $1 billion value of futures contracts had been liquidated.

Traders had been actively shopping for the dip, as proven by the rise in stablecoin deposits and the growing open curiosity of the Bitcoin futures market. Because of this, Bitcoin noticed a fast turnaround, rallying by greater than 10% in a single day.

Bitcoin futures open curiosity. Supply: Bybt.com

So what comes subsequent?

Alex Saunders, a cryptocurrency analyst, stated that stablecoins are “flooding exchanges,” which is commonly indicative of a bullish development.

Previous to the restoration, Michael van de Poppe, a full-time dealer on the Amsterdam Inventory Change, stated an all-time excessive is probably going for Bitcoin if it surpasses $38,000 once more.

In a single day, the worth of Bitcoin pierced by way of the $38,000 resistance space, which Van de Poppe pinpointed. Therefore, within the quick time period, BTC is on monitor to retest its record-high. He stated:

“Bitcoin did not change a lot. It flipped the $33,000 degree for assist and due to this fact is keen to check the $37,000-38,000 degree. That one must flip. If it does, we’ll be keen for brand new all-time highs. If not, extra consolidation probably.”

Bitcoin’s rally additionally coincides with the opening of Grayscale’s merchandise on Jan. 13. If the worth of Bitcoin continues to rise, it may propel extra institutional and accredited buyers to acquire publicity to BTC by way of the Grayscale Bitcoin Belief (GBTC).

There may be additionally a powerful argument to be made that the reopening of GBTC kickstarted the rally, to start with, signifying that the uptrend is led by establishments, not by retail buyers.