Massive USDT Exchange Inflows Continue, Potentially Acting as Fuel for the Bitcoin and Wider Cryptocurrency Rally

On-chain data shows a massive amount of the stablecoin USDT has been moving to exchanges recently, potentially acting as fuel for the Bitcoin and wider cryptocurrency rally.

On-chain data shows a massive amount of the stablecoin USDT has been moving to exchanges recently, which could be acting as fuel for the Bitcoin and wider cryptocurrency rally.

Fresh Analysis Shows Stablecoin Exchange Inflows Remained High

In a new post on its platform, the on-chain analytics firm Santiment discussed the trend in the Exchange Flow Balance for Tether’s USDT.

For the uninitiated, the “Exchange Flow Balance” is an indicator that tracks the net amount of a given asset entering or exiting the wallets associated with centralized exchanges.

When the value of this metric is positive, it means the inflows are outpacing the outflows, and a net amount of the coin is entering the exchanges' wallets. Such a trend is usually a sign of demand among investors for trading away the cryptocurrency.

On the other hand, a negative indicator implies the holders are withdrawing a net number of tokens from these platforms. This kind of trend suggests the market is in a phase of accumulation.

Now, here's a chart that shows the trend in the Exchange Flow Balance for USDT over the last couple of years.

As you can see in the above graph, the Exchange Flow Balance for USDT has observed several large positive spikes over the past month, indicating that large investors have been depositing their tokens.

For assets like Bitcoin, a positive Exchange Flow Balance can be a bearish sign, as it could suggest the holders are planning to sell. However, the same isn't true when the asset involved is a stablecoin.

Investors generally store their capital in these fiat-tied tokens to avoid the volatility of Bitcoin and other cryptocurrencies. Such users eventually plan to venture into the volatile side once they feel the conditions are right.

And when the time comes, they naturally transfer to exchanges to swap to Bitcoin or whatever desired coin. This act of selling USDT does not affect its value since the coin is, by definition, always stable around the $1 mark.

On the other hand, the asset they are shifting to does witness fluctuations from the purchase. As such, stablecoin exchange inflows are usually considered a bullish sign for Bitcoin and other assets.

According to Santiment, over the last eight weeks, exchanges have received a net average of $40 million in USDT, which could be helping to fuel the bull rally and the many historic crypto pumps.

“Look for stablecoin ‘dry powder’ to continue flowing in during this final stretch of 2024,” the analytics firm added.

BTC Price at the Moment

Bitcoin set a new all-time high (ATH) above the $108,000 mark yesterday, but the coin seems to have seen a pullback since then, as its price is now trading around $104,500 at press time.