High Stablecoins Exchange Netflow and Exchange Supply Ratio may signal a dip in Bitcoin price: CryptoQuant
CryptoQuant, a leading provider of on-chain and market data analytics for the cryptocurrency industry, has published a quicktake report on the recent trends of stablecoins exchange netflow and exchange supply ratio. According to the report, both indicators have reached their highest levels in months, which may suggest that retail traders are selling their stablecoins for other cryptocurrencies, especially Bitcoin. This could put downward pressure on the Bitcoin price and create a local low in the near future.
Stablecoins are digital tokens that are pegged to fiat currencies, such as the US dollar, and are widely used as a medium of exchange and a store of value in the crypto market. Stablecoins exchange netflow is the difference between the amount of stablecoins flowing into and out of the exchange wallets. A positive netflow means that more stablecoins are entering the exchanges than leaving, which indicates a potential increase in buying demand for other cryptocurrencies. Conversely, a negative netflow means that more stablecoins are leaving the exchanges than entering, which indicates a potential increase in selling pressure for other cryptocurrencies.
Stablecoins exchange supply ratio is the ratio of the Bitcoin supply to the supply of stablecoins denoted in Bitcoin. It measures the comparative power status between Bitcoin and stablecoins by comparing their market capitalizations. A high ratio means that the Bitcoin supply is large compared to the stablecoins supply, which indicates a low buying power and a possible price drop. A low ratio means that the Bitcoin supply is small compared to the stablecoins supply, which indicates a high buying power and a possible price rise.
According to CryptoQuant, the value of stablecoins exchange supply ratio is at its highest value since June 2020, which means that the Bitcoin supply is large compared to the stablecoins supply. This implies that the stablecoins have low buying power and may not be able to support the Bitcoin price at the current level.
On the other hand, the 30-day moving average of stablecoins exchange netflow is at its highest value since July 2023, which means that more stablecoins are entering the exchanges than leaving. This implies that the retail traders are selling their stablecoins for other cryptocurrencies, especially Bitcoin, in anticipation of a price increase.
However, CryptoQuant warns that this could be a trap, as the increased demand for Bitcoin may not be sustainable and may lead to a price correction. The report states that the high stablecoins exchange netflow and exchange supply ratio may signal a dip in the Bitcoin price and create a local low in the coming days.
The report also suggests that the investors should pay attention to other on-chain indicators, such as the exchange reserve, the miner outflow, and the network statistics, to get a better picture of the market sentiment and the supply and demand dynamics.
The current price of Bitcoin is $42,616.01, down 0.8% in the last 24 hours. The market capitalization of Bitcoin is $835.24 billion, accounting for 49.42% of the total crypto market cap.
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