Could Falling USDT Deposits Indicate a Bearish Signal for Bitcoin?
Could Falling USDT Deposits Indicate a Bearish Signal for Bitcoin?
Bitcoin (BTC) is on the verge of ending April profitably as it maintains its value above $28,600. However, a calculation has emerged that indicates a potential bearish signal for the price of BTC and other cryptocurrencies.
The calculation in question refers to the declining number of stablecoin Tether (USDT) deposits on exchanges, which have now reached a seven-day average of 579,536, the lowest figure in the past three months since January. This was observed by the data analysis platform Glassnode, which tweeted a chart showing 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. Stablecoins are tied to the value of real assets such as gold or other fiat currencies.
In this case, USDT is pegged to the US dollar and is typically used to minimize exposure to market volatility. When investors seek to buy a crypto asset they often exchange their local currency for USDT to maintain value before exchanging 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 drop in USDT deposits indicates a decrease in demand for crypto-assets which could lead to a decrease in market prices. This makes it a bearish indicator.
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Since Bitcoin is the leading cryptocurrency and controls 47% of the market, it is the most affected by this trend. However, if this trend shifts and USDT deposits on exchanges increase, as they did after the recent low in January, the prices of bitcoin and other cryptoassets could rise.
It should be noted that this calculation is not a foolproof bearish indicator, but only an analytical model that predicts potential scenarios. Furthermore, while the declining USDT deposits indicate a bearish indicator, other analyzes interpret the opposite.
When investors want to buy cryptocurrency, they often exchange 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 remain 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 small market correction in the past few days. It now appears to be stuck below the physiological zone of $30,000 and is preparing for another ascent.
Currently, the support is to be seen in case of a further correction at $27,000, but if the market turns bullish, Bitcoin could surpass $30,000 and reach its next resistance level at $31,000 in the coming days.
Selected image istock, charts from glassnode and tradingview
