- The resumption of BTC and ETH flows from the exchanges indicated accumulation
- The USDT Dominance chart showed that investors could be preparing to take on more risk
Bitcoin [BTC] fell below the bullish bastion of $40k last week, but quickly bounced back higher. A message dated January 30 from Santiment on X (formerly Twitter) sheds light on what happened.
????If #Bitcoin‘S & #Ethereum‘s respective stocks have continued to disappear post-market #ETF approvals, there is an interesting development #Tether almost 4% of the available supply will return to the fair within five weeks. The increase in purchasing power implies this
(Continued) ???? pic.twitter.com/hQrBhZchEu
— Santiment (@santimentfeed) January 30, 2024
Ethereum [ETH] and the rest of the crypto market is expected to rise again, provided certain conditions are met.
Understanding the stablecoin movement onto exchanges and onto the dominance charts could shed more light on where the market goes next.
Research into the trend of foreign exchange reserves
Bitcoin and Ethereum flowing from centralized exchanges are a sign of accumulation. As the Santiment post outlines, this indicates restraint and a reduced risk of sell-off. Yet the BTC flow from the exchanges is not a new trend.
This outflow has been going on since March 2023. The trend stopped in early December when the Bitcoin price rose to $44,000.
Source: CryptoQuant
From then until a week ago, foreign exchange reserves slowly moved higher as holders made gains on the explosive BTC rally to $45,000. The approval of the Bitcoin Spot ETF saw the price drop below $40,000 market sentiment went from Greed to Neutral.
Foreign exchange reserves fell again last week. Meanwhile, the Tether [USDT] reserves on the stock exchanges have increased.
The USDT dominance chart could be useful
The increase in Tether reserves on exchanges is a sign of confidence among investors. They are showing their willingness to risk their stablecoin capital on altcoins and could push asset prices higher in the market.
A downtrend in the USDT Dominance chart would be accompanied by a market-wide rally. USDT dominance is a measure of USDT market capitalization as a percentage of crypto market capitalization.
Therefore, it is referred to as ‘dominance’, similar to Bitcoin’s dominance.
Source: USDT.D on TradingView
In the second half of January, USDT dominance soared higher as prices plummeted. This was indicative of investors fleeing to the stablecoin amid market uncertainty. But the trend may be starting to reverse.
The white box represented a resistance zone from December that has since become support. However, the recent decline in dominance could continue.
If it falls below the 5.88% mark, the highlighted zone will turn into resistance again.
Read Bitcoin’s [BTC] Price forecast 2024-25
Now that Bitcoin is back above the $43,000 mark, confidence in the market is starting to increase. This could allow Bitcoin, and subsequently several sectors in the altcoin market besides Ethereum, to soar higher.
A dramatic meme coin pump could mark the end of this run, just like it did the first week of December.