Journalist
Posted:
- The influx of stable coins into the exchanges was crucial for the recovery of the market.
- The circulating supply of ERC-20 stablecoins has noticeably increased recently.
The ongoing crypto market rally that started in mid-October is a turning point rather than a year-end recovery.
With optimism surrounding possible approvals of more than half a dozen spot Bitcoin [BTC] Exchange Traded Funds (ETFs) peaking, most analysis today will tell you that the worst of the bear market is behind us.
Late year flowering
The global market capitalization has risen 34% since mid-October, adding almost $360 billion to the time of writing, according to CoinMarketCap data accessed by AMBCrypto.
Source: CoinMarketCap
With valuations soaring, trading activity across the market saw a sharp turnaround. Daily volumes averaged nearly $50 billion last month, a welcome change from the $25 billion to $30 billion recorded over the past two quarters.
Stablecoins key to market recovery?
On-chain analytics firm Santiment drew attention to key developments that could have strongly supported the ongoing rally.
In the period between August 19 and October 16, approximately 3.54% of stablecoin Tether shares were [USDT] the circulating supply was deposited on stock exchanges. In absolute terms, this amounted to a flight of over $3 billion in USDT tokens.
Source: Santiment
In addition, 0.72% of the entire supply of USD coins [USDC] hit the stock market around the same time.
Such large inflows usually act as bullish signals for the market. This is because investors who ship stablecoins are likely doing so to purchase other cryptocurrencies.
As is known, stablecoins are the main way for traders on non-fiat crypto exchanges to enter and exit transactions. Stablecoins allow traders to hold their fiat value without leaving the chain and cashing out.
Therefore, increases in stablecoin deposits are a harbinger of strong trading activity in the market.
The subsequent rally, which began in mid-October, supported the reasoning presented above.
However, when most stablecoins were converted to other cryptos, their supply on exchanges decreased. From 26.74% on November 9, USDT deposits on trading platforms fell to 22.13% at the time of writing.
When examining the developments, Santiment noted:
“The return of USDT and USDC to exchanges will be critical to seeing market caps continue to rise over the last five weeks of 2023.”
The circulating supply of ERC-20 stablecoins has noticeably increased over the past two weeks, according to AMBCrypto’s research of CryptoQuant. A continued increase in the market capitalization of stablecoins would support the idea of a market recovery.
Source: CryptoQuant
