In the past 24 hours, Bitcoin has experienced a remarkable price increase, bouncing back to $57,000. Here’s a look at the possible reasons for this surge, based on on-chain data.
Significant Stablecoin Inflows to Exchanges Preceding Bitcoin Surge
According to a recent post on X by the market intelligence provider IntoTheBlock, there has been a notable influx of stablecoins into exchanges.
The key metric to consider is the “Exchange Netflow,” which tracks the net movement of a particular coin or a group of coins into or out of the wallets linked to centralized exchanges. This metric is determined by subtracting the outflows from the inflows.
Below is the chart provided by IntoTheBlock that illustrates the trend of combined Exchange Netflow for all stablecoins over the last few months.
The metric has shown positive values in recent days | Source: IntoTheBlock on X
The graph above indicates that the stablecoin Exchange Netflow has recently been at significantly positive levels, suggesting that investors have been making substantial net deposits into these exchanges.
Typically, holders transfer their coins from self-custodial wallets to exchanges when they intend to engage in trading activities. In the case of Bitcoin, such selling can have a bearish impact on the price; thus, positive Exchange Netflows may be interpreted as a negative indicator for the asset.
However, in this scenario, the cryptocurrencies being discussed are stablecoins, which function differently from more volatile assets as investors maintain them for distinct purposes.
Investors typically hold stablecoins to avoid the price fluctuations common within the broader market, as these tokens are generally pegged close to the $1 value.
Stablecoin holders usually plan to eventually trade back into more volatile assets; otherwise, they would have simply kept their funds in fiat currency.
When these investors decide it’s the right time to make that transition into volatile coins, they may transfer their stablecoins to exchanges. This conversion into Bitcoin and other assets can provide a natural price boost, making positive stablecoin Exchange Netflows potentially bullish for these volatile assets.
Recently, investors deposited approximately $300 million in stablecoins into exchanges, indicating high demand for purchasing assets like Bitcoin.
Since that time, BTC has recorded an increase of over 3%, rising past the $57,000 threshold. Given the timing, it’s likely that these stablecoin transactions played a role in the price rally.
Thus, keeping an eye on the stablecoin Exchange Netflow might be worthwhile in the coming days, as further net deposits could signal a continuation of Bitcoin’s upward trend.
BTC Price
Though Bitcoin has made gains in the last day, its current price of $57,200 remains below the levels it was trading at during the final week of August.
The coin's price seems to have undergone a significant decline over the past couple of weeks | Source: BTCUSD on TradingView
Image credits: Dall-E, IntoTheBlock.com, chart courtesy of TradingView.com
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