Key facts:
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Crypto market liquidity is increasing.
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Over $3.6 billion worth of USDT has flowed in over the past month.
While Bitcoin (BTC) and cryptocurrencies have been in a corrective range for six months, stablecoin issuance is growing. This anticipates possible bullish movements for volatile cryptoassets.
In the last month, More than 3.6 billion dollars (USD) entered tether USD (USDT)the stablecoin with the largest market capitalization. This increase can be observed in the following chart.
The market cap of USDT per day is shown in orange, and the price of BTC is shown in black. Source: CryptoQuant.
This type of increase in capitalization reflects a greater allocation of external capital within the Cryptocurrency market,” explains Brazilian analyst Caue Oliveira. In a report In this regard, he points out that It means that liquidity is growing in the cryptocurrency marketbut has not yet entered into volatile assets like bitcoin.
The analyst goes on to say that “periods with increasing liquidity through stablecoins reflect a greater demand for digital assets.” However, he clarifies that this does not necessarily happen immediately; therefore, it is what could be seen later.
“At the moment, much of the capital being allocated to stablecoins remains unpunished on the order books, but this ‘firepower’ could hit the market at any time,” Oliveira highlights.
The stablecoins are cryptoassets that maintain the same value as a fiat currency. Most follow the price of the US dollar, which is why they are also informally referred to in the market as “crypto or digital dollar”.
In general, their purchases increase when investors want to remain protected from possible downward volatility in the market, in anticipation of entering when the prospects are better. Therefore, their movements function as an indicator of investor behavior.
The price of bitcoin The cryptocurrency has been in a sideways trend for the past six months, while recording lower lows and lower highs. This is since it hit an all-time high of USD 73,700 in March, as the chart shows. Consequently, the bullish sentiment of the overall market is cryptocurrencies has been affected.
For Oliveira, It is also possible that institutional investors are buying digital assets through TWAP orders or with algorithms to reduce the impact on short-term prices.
TWAP (time-weighted average price) orders refer to an investment strategy. This consists of dividing purchases or sales into fractions over a period of time, so as not to strongly influence the price. It can be done manually or through algorithms, i.e. automatically.
Institutional investors often use this strategy due to the large volumes of capital they manage. In this way, they reduce the downward impact on the price with their sales and the upward impact with their purchases. Although calming down a rise seems counterproductive, they seek to avoid an artificial rise, maintain discretion and reduce volatility.
In fact, This can be seen in the behavior of whales. (investors with more than 1,000 BTC) who have made multiple purchases this week, as seen below according to data collected by the explorer Lookonchain.
Transactions from a whale from the Binance exchange to its wallet. Source: Lookonchain.
Investors are preventing bitcoin from falling further
Demand from large investors, along with retail demand, explains why bitcoin has not fallen to lower levels. However, specialists Further falls are not ruled out in Septemberpartly due to the impatience of short-term investors who are in losses and the typical influence of this month.
September is usually a bearish month for markets, as it is when the northern hemisphere summer ends. This is because, during this season, the holiday season interrupts economic activities. Then, the demand for risk tends to grow, which can be strengthened by the expected reduction in prices. interest rates in the United States.
In this sense, In a better outlook, we could see a rotation of capital from stablecoins to bitcoin and volatile cryptoassets. Therefore, reviewing how they track their movements can help identify the price continuity of bitcoin.
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