Quant points out a curious relationship between USDT input and Bitcoin price
A quant has explained using chain data that there may be an interesting relationship between the USDT exchange inflow and the Bitcoin price.
USDT derivative exchange inflows can affect Bitcoin price
As pointed out by an analyst in a CryptoQuant post, many stablecoins entering derivatives exchanges have recently been ahead of a rise in the BTC price. The relevant indicator here is “Tether Derivatives Exchange Inflows”, which measures the average amount of USDT currently being transferred to the wallets of all derivatives exchanges.
This metric is different from the normal exchange inflow, as it measures the total amount of the stablecoin flowing into the exchanges rather than the average amount flowing into these platforms per transaction.
The advantage of this indicator over normal exchange inflows is that a few whales can skew the final metric as they typically transfer large amounts. At the same time, the former gives a better picture of the average investor’s behavior in the market.
When the mean value of inflow is high, a large amount of USDT is flowing into the exchanges with each transaction right now. On the other hand, low values mean that the average holder does not deposit too many coins to these platforms.
Now, here’s a chart showing the trend in the 7-day moving average (MA) of Tether exchange assets, as well as in the Bitcoin price, over the last couple of weeks:
The possible relationship between the price of Bitcoin and USDT derivative exchange inflow mean | Source: CryptoQuant
As you can see in the graph above, the quant has marked the various points of interest in the USDT derivative exchange inflows and also how the Bitcoin price reacted to these instances.
It seems that every time this metric has risen to relatively high levels recently, the cryptocurrency’s price has first observed a small downtrend and followed up with some recovery.
Typically, investors deposit stable coins like Tether to exchanges when they want to exchange them for a volatile cryptocurrency like Bitcoin, thereby putting buying pressure on the price of the coin they’re switching to.
However, as the inflow funds indicator used here is only for derivatives exchanges, the likely purpose behind these deposits was not to buy other assets with them (as spot exchanges are usually used for this reason).
Quant believes that these recent Tether exchange inflows were possibly done to open long positions for Bitcoin, hence the bullish effect on the asset.
“Since this is not a rule, it cannot be accepted as 100% accurate and we may not always see the price movement I mentioned,” warns the analyst. “I have presented you with a statistic that you should be careful with when opening trades.”
BTC price
At the time of writing, Bitcoin is trading around $28,000, up 14% in the past week.
Looks like the value of the asset has declined in the last few hours | Source: BTCUSD on TradingView
Featured image from Maxim Hopman at Unsplash.com, Charts from TradingView.com, CryptoQuant.com
