Bitcoin has seen a dip to $58,000 over the past day. Here’s what might be behind it, according to on-chain data.
Exchanges have seen a large number of Tether withdrawals recently.
According to data from market intelligence platform In the massCentralized exchanges recently saw outflows of Tether (USDT) exceeding $1 billion.
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Investors typically hold their coins on exchanges when they want to trade them in the near future, so moving to withdraw their tokens indicates that they are interested in holding them for the long term.
For volatile assets like Bitcoin, outflows can naturally be a bullish sign for this reason. But in the context of the current topic, the asset being withdrawn is a stablecoin, so the market implications are a bit different.
Typically, investors store their capital in fiat-pegged currencies like Tether when they want to escape the volatility associated with currencies like BTC. These holders eventually plan to return to the other side of the market and may use exchanges to do so.
When holders of assets like Bitcoin buy their stablecoins, they naturally end up boosting their prices. As such, stablecoin inflows into the exchange could be a bullish signal for the sector.
However, withdrawals of USDT and others to self-custody instead could be a bearish sign for the market, as it shows that investors do not believe they will be trading on the volatile side in the near future.
Therefore, the recent Tether withdrawals may have been the reason behind the Bitcoin price drop. The Tether exit from exchanges may have represented a fresh sell-off in Bitcoin, as many investors prefer to move to self-custody once the assets are swapped.
As IntoTheBlock points out in the chart, the recent large USDT outflows have also had a bearish impact on BTC.
In other news, the crypto derivatives market as a whole has seen a significant amount of liquidation as a result of the volatility that Bitcoin and other currencies have shown over the past day.
Below is a table of Queenglass This sums up the liquidation operations that took place during the last phase of market volatility.
As can be seen above, approximately $146 million worth of cryptocurrencies were liquidated over the past day, with $120 million coming from long contracts alone, accounting for over 80% of the total.
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Interestingly, Ethereum (ETH) is the token that contributed the most to this derivatives flow, not Bitcoin as is usually the case. However, Ethereum only has $6 million more liquidated than Bitcoin.
Bitcoin price
At the time of writing, Bitcoin is trading at around $58,800, down 4% in the past 24 hours.
Featured image by Dall-E, IntoTheBlock.com, chart by TradingView.com