Stalecoin Inflows Into Exchanges Decline Amid Crypto Market Bloodbath

News / 23.06.2021

The cryptocurrency market has endured multiple selloffs recently, leading to stablecoin inflows into exchanges dropping to the lowest level since October of last year. The market saw another massive pullback on June 21, which saw approximately $1 billion in crypto positions liquidated in 24 hours.

The bloodbath led to BTC dipping below the $33K as about $572M worth of coins was liquidated. This market plunge has led to speculations that the crypto market could be headed into another bear market. To make things worse, the closure of major mining hubs in China amid a relentless government crackdown on crypto has sent the market into a downward frenzy. 

The increase in the circulating supply of stablecoins often indicates where the crypto markets are headed. Analysts monitor the Tether (USDT) treasury for massive issuances, which usually suggest a possible BTC price pump is on the way.

Currently, there is a lot of FUD in the market as many spooked traders anticipate a bearish trend to take over the market. This bearish sentiment has led to a sharp dip in the stablecoin inflow transaction count as demand from institutional and retail investors decreases.

USDC Minting on the Rise as USDT Issuance Declines 

According to data from Cryptoquant, the circulating supply has increased steadily over the past five months, but issuance reduced drastically in June as fear gripped the market. The latest June 21 selloff has now driven stablecoin inflows into exchanges to a 9-month low. 

That said, a detailed look at the exchange inflows and reserves of specific stablecoins shows that USDT, which boasts a $62.67 billion market cap, could be losing its market dominance to USDC.

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                              USDC Circulating Supply | Source: CryptoQuant

An increase in Tether printing has in the past sparked significant market moves. However, Bitfinex and Tether have faced questions from regulators on whether their USDT reserves were sufficiently backed by fiat collateral. The drawn-out crackdown from regulators has made the USDT more of a liability to investors, leading to reduced issuance levels.

As the amount of USDT reduces, USDC deposits into exchanges have increased. The spike in USDC mintings could be caused by varying factors, including increased demand from institutions or even DeFi platforms getting ready to add USDC trading pairs.

The prospect of a shift in the makeup of the stablecoin market, with USDC taking Tether’s position, could benefit the crypto industry in the long haul. That is because audited ventures like USDC are considered more legitimate by governments and financial watchdogs. 

Stablecoin Hodlers Buy the Dip

According to one crypto analyst, the recent dry spell of stablecoin inflows into exchanges may have come to an end on June 21 as BTC crashed below $33K. 

“Bitcoin some signs of life, stablecoin floweth in. Shh, don’t say anything. You’ll scare it away,” the analyst tweeted

Signs of life were also seen in USDC markets, where Whale alert flagged multiple token minting events. This increased activity could indicate that the latest BTC slump has prompted stablecoin holders to consider buying the dip.

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Wayne is a Blockchain enthusiast and expert in crypto trading. Currently, he covers trendy issues on digital currencies.