The cryptocurrency market is showing signs of recovery, with Bitcoin’s price trying to regain its psychological high of $70,000 over the past few days. Interestingly, the latest on-chain data suggests that the cryptocurrency market may have the necessary liquidity to stage a revival.
Stablecoin inflows surge as key support retests
In a recent QuickTake post on the CryptoQuant platform, a CryptoOnchain market analyst revealed a dramatic boost in the TRC-20 USDT balance on Binance, the largest cryptocurrency exchange by trading volume. Quoting data from CryptoQuant data, the on-chain analyst revealed that USDT reserves increased from approximately $385 million on December 24 to approximately $5.2 billion as of February 21.
What’s more engaging is that this boost in Binance’s stablecoin reserve of approximately $4.8 billion occurred in less than a month.
Related reading: Bitcoin Options Update: Market Panic Eases, But Investors Remain on the Defensive – Details
The cryptocurrency expert highlighted that this significant boost in TRC-20 UDST reserves on Binance actually coincides with the price of Bitcoin and Ethereum approaching key support levels. This is usually a sign of increasing demand and continuous positioning activities, which often leads to the absorption of sales pressure.
Typically, a significant boost in stablecoin accumulation on exchanges – especially during periods of price weakness – signals that liquidity is rotating and not completely leaving the market. According to CryptoOnchain, this means that more capital is being positioned to potentially re-enter the Bitcoin or Ethereum market (among other assets).
TRC-20 Points of Use to Increase Retail Share
The network analyst further highlighted that TRC-20 USDT adoption is often specific to a specific class of investors, called retail participants. It is also common knowledge that huge institutions – which are not typically looking for profitable trades – often operate the ERC20 network.
In this regard, CryptoOnchain stated that “an increase in TRC-20 reserves may indicate greater retail exposure during the correction.”
While stablecoin reserves indicate that market participants may be preparing for a bullish reversal in Bitcoin’s price, it is worth noting that an immediate rebound is not guaranteed. This is because increased reserves only reflect the existence of neutral demand (so-called droughty powder) and not actual demand.
Nevertheless, if current market conditions are expected to provide stability in the near future, this “dry powder” waiting on the sidelines could quickly become the fuel that drives prices higher. Moreover, Bitcoin’s apparent demand indicator has recently turned positive, suggesting that a reversal may be imminent.
At the time of writing, Bitcoin is trading at around $67,971, which does not reflect any significant movement in the last 24 hours.
Featured image from iStock, chart from TradingView
