On-chain data shows that the number of stablecoin transactions going to spot exchanges has increased recently, something that could help fuel a Christmas Bitcoin rally.
Stablecoin deposits on spot exchanges have shown increasing demand recently
As noted by an analyst in a CryptoQuant after, there has been an increasing demand for spot exchanges lately. The relevant indicator here is the “stablecoin exchange deposit transactions”, which measures the total number of transfers related to these fiat-bound tokens making their way to exchanges.
Investors usually use stable coins when they want to escape the volatility associated with coins like Bitcoin. Once the holders feel that the prices are right to re-enter these volatile markets, they transfer their accumulated stables to exchanges to convert to their desired cryptocurrency. Thus, a large number of these tokens entering the exchange can act as buying pressure for other markets and thus have a bullish effect on the prices of Bitcoin and other assets.
Unlike the normal one inflow unit of measure, which simply measures the total amount flowing into exchanges, this indicator paints an idea about the actual demand in the market as it counts individual transfers, which cannot be inflated by a few big investors as their number of transactions will be much lower than their inflow values.
Now, here’s a chart that shows the trend in this metric as well as the opposite that tracks withdrawal transactions:
The value of the metric seems to have increased in recent days | Source: CryptoQuant
As the chart above shows, the metric for depositing stablecoin exchange transactions has seen some growth recently, and at the same time, withdrawal transactions have fallen instead. This means that there is currently a demand to buy with stables, while there is not much interest in moving out of volatile markets using these fiat-bound tokens.
Such a situation has proven bullish for the price of Bitcoin in recent months, as the past examples of this trend on the chart show. “With stablecoin deposits rising and stablecoin withdrawals falling, the capitulation events may come to an end,” the quant notes.
The analyst believes this inflow could fuel another rally, saying that “such an uptick in retail investor sentiment could potentially lead to a Christmas rally.” It now remains to be seen whether this stablecoin influx will prove constructive for the price this time around or not.
Looks like BTC has observed a decline in the last few days | Source: BTCUSD on TradingView
At the moment of writing, The price of Bitcoin hovering around $16,900, down 1% over the past week.
