Bitcoin Price Vs Stablecoin Inflows: Is the Downtrend a Cause for Concern?

Key Points

• Bitcoin’s recent uptrend has correlated with increasing stablecoin inflows into exchanges.
• The overall trend of stablecoin inflows has been in decline since December.

Bitcoin [BTC] recently reached a high of $105.8k. This increase in the leading cryptocurrency’s price was accompanied by a strong inflow of stablecoins into exchanges.

According to CryptoQuant Insights, the inflow of stablecoins to exchanges has been on the rise since Monday, 13 January. During this period, the price of Bitcoin has also been trending upwards.

Stablecoin Inflows and Market Trends

While this seems to be a bullish sign in the short-term, it remains to be seen if any patterns from the previous bull run will repeat. The total market cap’s expansion alongside the stablecoin inflows was also examined.

The 7-day simple moving average for stablecoin exchange inflows showed a series of spikes from 2021-23. These spikes indicated increased stablecoin inflows to exchanges.

Increased inflows are generally seen as a bullish sign as more stablecoins sent to exchanges means there is more buying power in the market. Conversely, a decrease in inflows can suggest bearish market conditions.

Stablecoin Inflows and Crypto Market Movement

Despite the short-term inflows, the trend over the last six weeks has not been favorable to buyers. Comparing the stablecoin inflows to the total crypto market cap, the bull run started and ended in November 2021.

Despite the price slump since then, the inflows chart showed several significant upward movements in 2022 and March 2023. Therefore, the inflows metric does not necessarily dictate the movement of the total crypto market.

In conclusion, the short-term increase in stablecoin flow is promising. However, for the crypto market to sustain its rally, the metric’s downtrend since December needs to be reversed.