Bitcoin bears should brace for an impact as an on-chain indicator signals a major price rally for the cryptocurrency.
Data gathered by CryptoQuant, a South Korea-based blockchain analysis firm, shows a spike in stablecoin inflows across all the cryptocurrency exchanges. The company’s chief executive, Ki-Young Ju, shared the update on his Twitter handle this Thursday just as Bitcoin slipped below $45,000 during the late Asian session.
The Bitcoin-Stablecoin Connection
In retrospect, a stablecoin tends to speed up trades on exchanges by impersonating a fiat currency and its value. That keeps traders from having to convert their cryptocurrencies to/from real money for making trades. Meanwhile, companies that issue stablecoins promise to back their value by storing currencies in their reserves.
When traders deposit stablecoins on exchanges, it represents their likelihood of spending the tokens for cryptocurrencies. On the other hand, when exchanges experience stablecoins’ outflows, it alerts about an impending selling pressure in the market.
As of Thursday, stablecoin deposits across all the exchanges were rising. That hinted at an imminent upside move in the Bitcoin market, a gateway for traders to enter the cryptocurrency industry’s realm.
“You can call me crazy, but I think we’ll see 50k soon,” Mr. Ju wrote. “Just got another stablecoins deposit signal.”
The signal also appeared as Bitcoin corrected by more than 9 percent after establishing a new record high of $48,200 earlier this week.
The plunge mostly surfaced due to profit-taking sentiment among daytraders and booming interest in Ethereum’s rival tokens, including Polkadot and Avalanche.
Bullish All the Way
Nevertheless, the market sentiment remained bullish due to Tesla’s $1.5bn investment in the Bitcoin market and Twitter’s hint to copycat the trade as corporates hunted for cash alternatives amid the ongoing US dollar’s decline.
Furthermore, technical patterns indicated that Bitcoin’s correction is merely a consolidation move before it resumes its uptrend further. A bull flag forming on Bitcoin’s hourly chart also pointed at a breakout move towards $50,000.
As a word of caution, many mainstream financial news outlets published pieces against Tesla’s bitcoin investment, with economist Nouriel Roubini saying that other companies should not do the same. Strategists at JPMorgan also published a note stating that bitcoin remains too volatile for corporate treasuries that cannot afford higher volatility in their portfolios.