Bitcoin (BTC) is poised to end April profitably as it holds its value above $28,600. However, a metric has emerged that points to a potentially bearish signal for the price of BTC and other cryptocurrencies.
The metric in question refers to the decrease in the number of stablecoin Tether (USDT) deposits on exchanges, which has now reached a seven-day average of 579,536, the lowest figure in the last three months since January. This was observed by the data analysis platform Glassnode, which tweeted a graph illustrating this trend.
How USDT Deposits Affect the Crypto Market
To understand the implications of USDT deposits on exchanges, it is important to note that USDT is the most widely used stablecoin. Stable coins are pegged to the value of real-world assets like gold or other fiat currencies.
In this case, USDT is pegged to the US dollar and is generally used to minimize exposure to market volatility. When investors are looking to buy a crypto-asset, they often trade their local currency for USDT to hold value before trading USDT for the desired asset on a crypto exchange.
Therefore, the amount of USDT available on exchanges is a crucial liquidity indicator for other cryptocurrencies. The current decline in USDT deposits indicates a drop in demand for crypto assets which could lead to lower market prices. This makes it a bearish indicator.
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Since Bitcoin is the main cryptocurrency and controls 47% of the market, it turns out to be the most affected by this trend. However, if this trend changes and USDT deposits on exchanges increase, as they did after the last low in January, prices for bitcoin and other cryptoassets could skyrocket.
It should be noted that this metric is not a fail-safe bearish indicator but merely an analytical model that predicts potential scenarios. Additionally, while the decline in USDT deposits points to a bearish indicator, other analysis interprets the opposite.
When investors want to buy cryptocurrency, they often trade their USDT on exchanges for the desired asset. Thus, the amount of USDT available on exchanges is a crucial liquidity indicator for buying other cryptocurrencies.
The fear/greed index, a useful indicator for gauging market sentiment, is currently in the greed zone. This means that investors are still bullish on Bitcoin despite the increased volatility in recent days.
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bitcoin price analysis
Bitcoin is currently hovering between $29,000 and $29,500 after a slight market correction over the past few days. It now appears to be stuck below the physiological $30,000 zone and preparing for another ascent.
At the moment, the support to watch for a further correction is $27,000, but if the market turns bullish, Bitcoin could break above $30,000 and reach its next resistance level of $31,000 in the coming days.
Featured image istock, charts from glassnode and tradingview