Data suggests that stablecoin reserves on Binance have risen to a new record high recently, a potentially bullish sign for Bitcoin and other coins.
The stablecoin reserve on Binance has been growing rapidly recently
As one of the analysts at CryptoQuant Quicktake explained mailRecently, Binance’s stablecoin reserve has risen. The on-chain indicator relevant here is the “exchange reserve”, which measures the total amount of a given asset held in the wallets of one or more central exchanges.
When the value of this metric decreases, it means that investors are depositing a net amount of the token into these platforms. This trend indicates that there is market demand for cryptocurrency trading.
For volatile assets like Bitcoin, this type of trend can have a downward impact on their prices. However, in the case of stablecoins, the same does not apply because their prices are, by definition, stable around the $1 mark.
However, this does not mean that the sale of stablecoins has no impact on this sector. Investors generally store their capital in the form of these tied fiat tokens when they want to avoid the volatility associated with Bitcoin and others, but once they feel the time is right to buy back, they make a swap using exchanges.
As such, stablecoin inflows to exchanges could be a bullish sign for volatile assets like Bitcoin, as they show that investors are likely interested in trading their stables in favor of these tokens.
On the other hand, a falling exchange reserve indicates that investors are withdrawing assets into their own portfolios, perhaps for long-term holding. Once again, the trend is opposite between Bitcoin and stablecoins, with outflows for the former being bullish and the latter bearish.
Now, here’s a chart showing the trend in Binance’s ERC-20 stablecoin exchange reserve:
The value of the metric appears to have been sharply climbing in recent months | Source: CryptoQuant
As shown in the chart above, Binance’s stablecoin exchange reserve registered a rapid increase to a new all-time high (ATH) recently. The peak in this rally came before the BTC peak, meaning that it was buying from stablecoin holders that played a role in the rally.
Supply on the platform has declined since the peak, but the decline has only been slight so far, meaning there may still be plenty of fuel waiting to be deployed in Bitcoin and elsewhere.
This trend isn’t limited to Binance either, as another Quicktake analyst pointed out mail The combined stablecoin reserve of all platforms has also increased recently.
The trend in the 20-day and 100-day moving averages of the indicator | Source: CryptoQuant
Bitcoin price
At the time of writing, Bitcoin is trading at around $92,400, down over 1.5% in the past seven days.
The price of the coin has been stuck in a downward trajectory recently | Source: BTCUSDT on TradingView
Featured image by Dall-E, CryptoQuant.com, chart from TradingView.com
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