The crypto market is showing signs of recovery, with Bitcoin price attempting to regain its psychological $70,000 mark over the past few days. Interestingly, the latest on-chain data suggests that the cryptocurrency market may have just the liquidity needed to fuel a comeback.
Stablecoin inflows surge during retest of key supports
In a recent QuickTake post on the CryptoQuant platform, market analyst CryptoOnchain revealed a dramatic increase in TRC-20 USDT balances on Binance, the largest crypto exchange by trading volume. Citing CryptoQuant data, on-chain analysts revealed that USDT reserves have increased from approximately $385 million on December 24 to approximately $5.2 billion as of February 21.
What's even more interesting is that this roughly $4.8 billion surge in Binance's stablecoin reserves all happened within a month.
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Cryptocurrency experts highlighted that this significant rise in Binance’s TRC-20 UDST reserves actually coincides with Bitcoin and Ethereum prices approaching major support levels. This typically indicates increased demand and positioning activity is underway, both of which often lead to the absorption of selling pressure.
Typically, when there is a significant increase in the accumulation of stablecoins on an exchange, especially during periods of low prices, it is a sign that liquidity is cyclical and not completely withdrawn from the market. According to CryptoOnchain, this means more capital is being deployed for potential re-entry into the Bitcoin or Ethereum markets (among other assets).
TRC-20 Increase retail industry participation with usage points
On-chain analysts further highlighted that TRC-20 USDT adoption is often characteristic of a specific class of investors, known as retail participants. It is also widely known that ERC20 networks are often used by large institutions that do not typically pursue cost-effective transactions.
Therefore, CryptoOnchain concluded that “the increase in TRC-20 reserves may indicate increased retailer engagement during the correction period.”
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While stablecoin reserves indicate that market participants may be bracing for a bullish reversal in Bitcoin prices, it is worth noting that an immediate rebound is not guaranteed. This is because the rise in reserves only reflects the presence of inert demand (known as dry powder), not actual demand.
Nevertheless, if current market conditions stabilize in the short term, this “dry powder” on the sidelines could soon become fuel for higher prices. Additionally, Bitcoin’s apparent demand indicator recently turned positive, suggesting that a reversal may be imminent.
As of this writing, Bitcoin's value is around $67,971, with no significant movements in the past 24 hours.
Featured image from iStock, chart from TradingView
