The USDC currency reserves have risen sharply in recent times, which could be a factor that will help Bitcoin rebound from the last drop.
USDC Exchange Reserve Observes Sharp Rise In Recent Days
An analyst pointed out in a CryptoQuant posting that the huge amount of USD Coin flowing into exchanges lately could be used to fuel Bitcoin.
The “exchange reserve” is an indicator that measures the total amount of USDC currently sitting in wallets of all centralized exchanges.
Because stablecoins have fiat tied (which, in USDC’s case, is USD), they are as steady as fiat currencies. When investors want to escape volatility associated with the cryptocurrency market, they often shift coins such as Bitcoin into stablecoins.
When these investors believe the market is safe, they can exchange their holdings for the cryptos they desire.
The price of major cryptos such as Bitcoin can be pushed up by large amounts of purchases from holders with these types of holdings.
Here’s a chart showing the USDC reserve trend over the past few months.
Recent days seem to have seen an increase in the value of this metric. Source: CryptoQuant| Source: CryptoQuant
You can see that USDC has always been at its peak when BTC has fallen, as you can see from the graph.
This top has seen the reserve start to fall, while Bitcoin’s value either soared or moved in a different direction. It makes perfect sense, as investors now shift to volatile coins due to a declining reserve.
Recenty, the reserve’s value has been on the rise. The “inflow” indicator (which measures the total amount of coins moving into exchanges) also shown in the chart registered a big spike at about the same time as this rise.
It means that the majority of the recent increase in reserve came from USDC, which was sitting on exchanges for a while.
All these stablecoins can act as potential dry powder for fueling some upwards momentum for Bitcoin after the coin’s price has plunged below $22k today.
It is important to remember that spot exchanges are not able to control the market as much USDC flows into them. A large chunk of the latest inflows seem to have gone into derivatives instead, which, while also an indication of higher volatility for the market, doesn’t specifically mean the price will tend to go up. The volatility of the market could cause price swings in any direction.
Bitcoin Prices
At the time of writing, Bitcoin’s price floats around $21.4k, down 10% in the past week.
Source: BTCUSD on TradingView| Source: BTCUSD on TradingView
Featured Image from Kanchanara, Unsplash.com. Charts by TradingView.com. CryptoQuant.com.