Bitcoin’s Surge Linked to Stablecoin Inflows – Is the Downtrend a Red Flag?

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  • Bitcoin’s recent uptrend correlated positively with the stablecoin exchange inflows
  • These 7DMA inflows have been in decline since December

On January 15th, the value of Bitcoin [BTC] peaked at an impressive $105,800. This remarkable increase in price coincided with a significant surge in stablecoin inflows into cryptocurrency exchanges, reflecting robust demand for the world’s leading digital currency.

According to a recent post on CryptoQuant Insights, there’s been an increase in stablecoin deposits into cryptocurrency exchanges starting from January 13th. At the same time, the value of Bitcoin has been climbing as well over this period.

Instead of appearing to indicate a temporary uptrend, let’s explore if there are any recurring trends that emerged during past bull markets. Additionally, AMBCrypto looked into both the growth of the overall market capitalization and the influx of stablecoins.

Stablecoin inflows skyrocketed in November, but the trend has slowed down

To clarify fluctuations in the data, we utilized the 7-day simple moving average for inflows related to stablecoins on exchange platforms. This method smooths out the data and shows a sequence of peaks from years 2021 to 2023. These peaks indicate significant increases in stablecoin deposits into exchanges.

An increase in incoming funds (stablecoins) suggests a bullish trend, as it indicates increased buying strength within the market. Conversely, a decrease in these inflows might signal a bearish market, implying reduced buying power.

In November, after the 2024 U.S. presidential election results were announced, the 7DMA reached significant peaks. These highs persisted for approximately a month, but since the second week of December, it has been experiencing a decline.

Over the past six weeks, although there have been some temporary influxes, the overall pattern has not worked in favor of the buyers.

Looking at the ratio of stablecoin inflows to the overall crypto market cap, it’s clear that the bull run kicked off and ended in November 2021 during the 2021-22 period. Even though prices have dropped since then, the inflow chart demonstrates significant upward spikes in 2022 and also in March 2023.

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In other words, this demonstrates that the inflows figure doesn’t always predict the direction of the entire crypto market. Furthermore, it’s important to note that the inflows data includes newly created stablecoins entering exchanges, a trend that has consistently risen with time.

Essentially, it’s exciting to see an increase in stablecoin flows over a short period. But, it’s crucial to reverse the decline we’ve seen since December for the cryptocurrency market to maintain its upward momentum.

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2025-01-19 02:15