The price of Bitcoin (BTC) extended its recovery time on January 14 and recovered the $38,000 level. More importantly, despite the 28% plunge earlier this week, the weekly candle has turned green for the fifth consecutive week.
At the same time, according to CryptoQuant data, stablecoin deposits are pouring into cryptocurrency exchanges. This inflow may be a short-term catalyst for Bitcoin, as it indicates that marginalized capital is flowing back to BTC.
Why do stablecoins indicate strong demand for Bitcoin from buyers?
In the cryptocurrency market, many traders sell crypto assets such as Bitcoin to stablecoins instead of cash.
Stable coins such as Tether (USDT) are linked to the US dollar and can be traded across exchanges.
Most exchanges require complex “Know Your Customer (KYC)” verification procedures for bank transfers, and it can take a long time to deposit cash on the exchange.
Therefore, if whales or high-net-worth investors want to buy and sell bitcoins worth millions of dollars, stablecoins may be more convenient than cash.
Traders’ high demand for stablecoins has led to an increase in Tether’s valuation in recent months. Last month, Tether’s market value exceeded $20 billion. A month later, this figure has exceeded 24 billion U.S. dollars, which shows that the sideline capital in the cryptocurrency market has increased.
Dry powder trading
At the same time, stable currency deposits on exchanges have increased significantly in the past 24 hours. CryptoQuant tracks the exchange’s wallet and observes the deposit and outflow of stablecoins.
In major exchanges, as the price of Bitcoin began to rise, stablecoin deposits increased significantly on January 13.
On January 13, the price of Bitcoin fell to a low of $32,500 after the liquidation of futures contracts worth nearly $1 billion.
The increase in stablecoin deposits and the increase in open positions in the Bitcoin futures market indicate that investors are actively buying on dips. As a result, Bitcoin’s turnover rate was very fast, rising by more than 10% overnight.
So what’s next?
Cryptocurrency analyst Alex Saunders said that stablecoins are being “a flood of exchanges,” which usually indicates a bull market trend.
Before the recovery, Michael van de Poppe, a full-time trader at the Amsterdam Stock Exchange, stated that if Bitcoin surpassed $38,000 again, Bitcoin could hit a record high.
Overnight, the price of Bitcoin broke through the resistance level of $38,000, which Van de Poppe pointed out. Therefore, in the short term, BTC is expected to retest its record highs. He said:
“Bitcoin hasn’t changed much. It flipped the $33,000 support level, so it was eager to test the $37,000-38,000 level. That needs to be flipped. If so, we will be eager for new all-time highs. Otherwise, more mergers may occur. .”
The rise of Bitcoin also coincides with the opening of Grayscale products on January 13. If the value of Bitcoin continues to rise, it will push more institutional investors and qualified investors to gain exposure to BTC through Grayscale Bitcoin Trust (GBTC).
There is also a strong argument that the reopening of GBTC started a rebound from the beginning, which shows that the upward trend is dominated by institutional rather than retail investors.