Bitcoin (BTC) price extended its recovery on January 14, recovering the $ 38,000 level. What’s more, the weekly candle has now turned green for the fifth consecutive week, despite the 28% drop earlier this week.
Meanwhile, stablecoin deposits are flooding cryptocurrency exchanges, according to data from CryptoQuant. This influx may act as a short-term catalyst for Bitcoin, as it suggests that marginal capital is returning to BTC.
Why do stablecoins indicate strong buyer demand for Bitcoin?
In the cryptocurrency market, many traders sell crypto assets, such as Bitcoin, for stable currencies instead of cash.
Stablecoins, such as Tether (USDT), are indexed to the value of the United States dollar and can be traded on exchanges.
Most exchanges require a complicated Know Your Customer (KYC) verification process for bank transfers, and cash deposits on exchanges can take a long time.
That way, if a whale or a wealthy investor wants to buy and sell millions of dollars in Bitcoins, stables can be much more convenient than money.
The high demand for traders’ stablecoins has caused the appreciation of Tether to increase in recent months. Last month, Tether’s market capitalization exceeded $ 20 billion. A month later, that number is already over $ 24 billion, indicating an increase in marginal capital in the cryptocurrency market.
Dry powder going into the bags
Meanwhile, stablecoin deposits on the exchanges have increased substantially in the past 24 hours. CryptoQuant tracks exchange portfolios and observes stable currency deposits and outflows.
On major exchanges, stablecoin deposits increased noticeably on January 13, just as Bitcoin’s price started to recover.
On January 13, Bitcoin’s price fell to $ 32,500 after almost $ 1 billion in futures contracts were liquidated.
Investors were actively buying the dip, as shown by the increase in stablecoin deposits and the increase in the amount of open interest in the Bitcoin futures market. As a result, Bitcoin took a rapid turnaround, recovering by more than 10% overnight.
So, what’s next?
Alex Saunders, a cryptocurrency analyst, said that stablecoins are “flood pockets”, which is usually indicative of an upward trend.
Prior to the recovery, Michael van de Poppe, a full-time broker at the Amsterdam Stock Exchange, said that a historic maximum is likely for Bitcoin if it exceeds $ 38,000 again.
Overnight, Bitcoin’s price pierced the $ 38,000 resistance area, which Van de Poppe identified. Therefore, in the short term, BTC is on track to test its record again. He said:
“Bitcoin has not changed much. He has reversed the $ 33,000 level for support and is therefore looking forward to testing the $ 37,000-38,000 level. This needs to turn. If that happens, we will be looking forward to new all-time records. Otherwise, more consolidation is likely. “
Bitcoin’s rise also coincides with the opening of grayscale products on January 13. If the value of Bitcoin continues to rise, it could propel more institutional and accredited investors to gain exposure to BTC through the Grayscale Bitcoin Trust (GBTC).
There is also a strong argument to be made that the reopening of the GBTC kicked off the upside to begin with, meaning that the upward trend is led by institutions, not retail investors.