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Brewing a new rally as Bitcoin recovers $ 38K and stablecoin’s flood ‘exchange?

The price of Bitcoin (BTC) has expanded its recovery on January 14 and regains the level of $ 38,000. What’s more, the weekly light has now turned green for the fifth week in a row despite 28% crashes earlier in the week.

BTC / USD Weekly Light Chart (Bitstamp). Source: Tradingview

Meanwhile, stablecoin deposits are flooding into cryptocurrency exchanges, according to data from CryptoQuant. This influx may act as a short-term catalyst for Bitcoin, as it suggests that sideline capital is moving back to BTC.

Stable coins are pouring in on stock exchanges. Source: CryptoQuant

Why are stablecoins a sign of strong buyer demand for Bitcoin?

In the cryptocurrency market, many traders sell cryptocurrencies like Bitcoin for stablecoins rather than cash.

Stablecoins, such as Tether (USDT), are linked to the value of the US dollar and can be traded across exchanges.

Most exchanges require a complicated KYC verification process for bank transfers, and cash deposits in exchanges can take a long time.

As such, if a whale or an investor with a high net worth wants to buy and sell Bitcoin for millions of dollars, stack coins can be far more convenient than cash.

The high demand for stack coins from dealers has led to an increase in the valuation of Tether in recent months. Last month, the market value of Tether exceeded $ 20 billion. A month later, that figure is already over $ 24 billion. Dollar, indicating an increase in allocated capital in the cryptocurrency market.

Dry powder moves to swap

Meanwhile, stablecoin deposits in stock exchanges have risen significantly over the last 24 hours. CryptoQuant tracks the wallets of the stock exchange and observes deposits and outflows of stablecoin.

The stock exchange’s stable currency reserve. Source: CryptoQuant

Across major exchanges, stablecoin deposits rose markedly on January 13, just as the price of Bitcoin began to recover.

On January 13, the price of Bitcoin fell to as low as $ 32,500, after futures contracts for nearly $ 1 billion. Dollars were liquidated.

Investors actively bought dip, as evidenced by the rise in stablecoin deposits and the growing open interest in the Bitcoin futures market. As a result, Bitcoin experienced a rapid turnaround that rose by more than 10% overnight.

Bitcoin futures open interest. Source: Bybt.com

So what comes next?

Alex Saunders, a cryptocurrency analyst, said that stablecoins are “flood exchanges”, which is often a sign of a bullish trend.

Prior to the recovery, Michael van de Poppe, a full-time trader on the Amsterdam Stock Exchange, said there would likely be a full-time high for Bitcoin if it again exceeded $ 38,000.

During the night, the price of Bitcoin pierced through the $ 38,000 resistance area that Van de Poppe pointed out. Therefore, in the short term, BTC is on track to test its record high again. He said:

“Bitcoin did not change much. It reversed the $ 33,000 level for support and is therefore eager to test the $ 37,000-38,000 level. That one must turn. If it does, we will be eager for new highlights. If not, more consolidation probably. ”

The Bitcoin rally also coincides with the opening of Grayscale’s products on January 13th. If the value of Bitcoin continues to rise, it may drive more institutional and accredited investors to gain exposure to BTC through the Grayscale Bitcoin Trust (GBTC).

There is also a strong argument to be made that the reopening of GBTC started the rally to begin with, meaning that the uptrend is led by institutions, not by retail investors.