Tether (USDT) has continued to enter exchanges recently. Here’s why this can be a positive development for bitcoin.
Tether supply on exchanges is now the highest in 7 months
According to data from the on-chain analysis firm Holy, USDT worth $9.99 billion are now on the exchanges. The relevant indicator here is the “supply on exchanges”, which tracks the total amount of a cryptocurrency that is stored in the wallets of all centralized exchanges.
The interpretation of this metric may differ depending on the type of asset being analyzed. In the case of bitcoin, for example, the exchange reserve can be considered a measure of potential selling pressure, since one of the reasons investors may deposit the currency is for selling-related purposes.
Therefore, the increase in cryptocurrency supply on exchanges could be a sign that sales are increasing in the sector and therefore the price of the asset may be heading towards a bearish outcome.
In the context of the current discussion, the supply of btc on exchanges is not what is of interest, but rather the metric for Tether. USDT is a popular stablecoin (the largest by market capitalization) that always has its value pegged to the US dollar.
Here is a graph showing the trend in the supply of exchanges for Tether in recent years:
<img decoding="async" class="aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/10/Why-this-is-bullish-for-Bitcoin.jpeg" alt="Tether Supply on Exchanges versus bitcoin” width=”2695″ height=”1710″ loading=”lazy”/>
Looks like the value of the metric has been going up in recent days | Source: Santiment on X
Typically, an investor may want to hold their capital as a stablecoin like USDT to keep it away from the volatility associated with other assets in the cryptocurrency sector.
However, many of these stablecoin holders use these assets as a temporary safe haven as they eventually wish to return to the volatile market.
When these investors finally find the time to return to cryptocurrencies like bitcoin, they exchange their USDT for them. These traders can use exchanges to make this change, so an increase in the supply of the stablecoin on exchanges may be a sign that investors are looking to switch to volatile currencies.
This purchase using Tether can naturally cause a bullish effect on the prices of btc and others. So in this way, the stablecoin exchange supply can be considered the opposite of the btc metric.
The chart above shows that the value of the indicator has increased in recent weeks. “The $9.99 billion in Tether sitting on exchanges is the highest level of purchasing power for the largest cryptocurrency stablecoin in roughly seven months,” Santiment notes.
It must be taken into account that the increase in the supply of Tether on exchanges only implies an increase in the dry powder available. Whether bitcoin benefits from a boost depends on whether this dry powder is used to purchase the asset or not.
btc Price
bitcoin has declined in recent days as the asset is now trading around the $27,600 level.
<img decoding="async" class="alignnone size-medium aligncenter" src="https://www.tradingview.com/x/MfJHCum0/" alt="bitcoin price chart” width=”1534″ height=”869″ loading=”lazy”/>
btc has recovered a bit from its lows from yesterday | Source: BTCUSD on TradingView
Featured image by DrawKit Illustrations on Unsplash.com, Charts by TradingView.com, Santiment.net
