Data shows that the stablecoin reserve on Binance recently hit a recent record high, which could be a bullish sign for Bitcoin and other coins.
The Stablecoin exchange reserve on Binance has seen rapid growth recently
As explained by an analyst at CryptoQuant Quicktake postthe Binance stablecoin reserve has recently increased. A significant chain metric in this case is the “Exchange Reserve”, which measures the total amount of a given asset held in the portfolios of one or more centralized exchanges.
When the value of this indicator drops, it means that investors are depositing the net amount of the token into these platforms. Such a trend means that there is a demand for cryptocurrency trading in the market.
For volatile assets like Bitcoin, this type of trend could have a bearish impact on their prices. However, this is not true for stablecoins, as their prices by definition remain stable around $1.
However, this does not mean that the sale of stablecoins has no importance for the industry. Investors typically hold their capital in the form of fiat tokens when they want to avoid the volatility associated with BTC and others, but when they feel the time is right to redeem, they swap using exchanges.
As such, the inflow of stablecoins onto exchanges could be a bullish signal for volatile assets like Bitcoin as it shows that investors are potentially interested in trading their stables for these tokens.
On the other hand, seeing a decline in the Stock Exchange Reserve means that investors are withdrawing assets into their deposit portfolios, possibly to hold them for the long term. Once again, the trend is opposite for Bitcoin and stablecoins, with outflows for the former being bullish and outflows for the latter being bearish.
Here is a chart showing the trend in the ERC-20 stablecoin reserve for Binance:
The value of the metric appears to have been sharply climbing in recent months | Source: CryptoQuant
As shown in the chart above, the stablecoin reserve for Binance has recently seen a rapid escalate to a recent all-time high (ATH). The peak of this surge preceded BTC’s peak, suggesting that purchases from stablecoin holders played a role in this run.
Supply on the platform has dropped since its peak, but so far the decline has only been modest, meaning there may still be plenty of fuel waiting to be deployed in BTC and others.
This trend is not exclusive to Binance, as another analyst at Quicktake noted post that the total stablecoin exchange reserve for all platforms has also increased recently.
The trend in the 20-day and 100-day moving averages of the indicator | Source: CryptoQuant
BTC price
At the time of writing, Bitcoin is trading at around $92,400, down more than 1.5% in the last seven days.
The price of the coin has been stuck in a downward trajectory recently | Source: BTCUSDT on TradingView
Featured image from Dall-E, CryptoQuant.com, chart from TradingView.com
