Bitcoin (BTC) is about to end April profitably as it maintains its value above $28,600. However, a metric appeared indicating a possible bearish signal for the price of Bitcoin and other cryptocurrencies.
The metric in question indicates a dwindling number of stablecoin tether (USDT) deposits on exchanges, which have now reached a seven-day average of 579,536, the lowest number in the past three months since January. This was noted by the Glassnode data analytics platform chirp A graph depicts this trend.
How do USDT deposits affect the cryptocurrency market?
To understand the implications of USDT deposits on exchanges, it is important to note that USDT is the most widely used stablecoin. Stablecoins are pegged to the value of real world assets such as gold or other fiat currencies.
In this case, USDT is pegged to the US dollar and is usually used to reduce exposure to market volatility. When investors seek to purchase a crypto asset, they often exchange their local currency for USDT to maintain value before exchanging the USDT for the desired asset on a cryptocurrency exchange.
Therefore the amount of USDT available on exchanges is a crucial indicator of liquidity for other cryptocurrencies. The current decline in USDT deposits indicates a decrease in demand for the crypto-asset which could lead to lower market prices. This makes it a bearish indicator.
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With Bitcoin being the leading cryptocurrency and controlling 47% of the market, it is the most affected by this trend. However, if this trend changes and USDT deposits increase on exchanges, as they did after the last drop in January, bitcoin and other crypto-asset prices could go up.
It should be noted that this metric is not a bearish fail-safe indicator but merely an analysis model that predicts possible scenarios. Moreover, while declining USDT deposits indicate a bearish sign, other analyzes explain the opposite.
When investors want to buy a cryptocurrency, they often exchange USDT on exchanges for the desired asset. Thus, the amount of USDT available on exchanges is a crucial liquidity indicator for buying other cryptocurrencies.
The Fear/Greed indicator, which is a useful indicator for gauging market sentiment, is currently in the greed zone. This means that investors are still bullish on Bitcoin despite the increasing volatility in recent days.
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Bitcoin price analysis
Bitcoin is currently hovering between $29,000 and $29,500 after a minor market correction in the past few days. It now appears to be stuck below the physiological $30,000 region and poised for another climb.
Currently, the support to watch in case of a further correction is $27,000, but if the market turns bullish, Bitcoin could surpass $30,000 and reach the next resistance at $31,000 in the coming days.
Featured image, graphs from glassnode and tradingview