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Could Declining USDT Deposits Indicate A Bearish Signal For Bitcoin?

Bitcoin (BTC) is on the verge of wrapping up April profitably as it maintains its value above $28,600. However, a metric has emerged that indicates a potentially bearish signal for the price of BTC and other cryptocurrencies.

The metric in question refers to the dwindling number of stablecoin Tether (USDT) deposits on exchanges, which has now reached a seven-day average of 579,536, the lowest figure in the past three months since January. This was observed by the data analytics platform Glassnode, which tweeted a chart depicting this trend. 

USDT deposits fall to three month low: source @glassnode
USDT deposits fall to three-month low: source @glassnode

How USDT Deposits Affect The Crypto Market

To grasp the implications of USDT deposits on exchanges, it is important to note that USDT is the most widely used stablecoin. Stablecoins are pegged to the value of real-world assets like gold or other fiat currencies. 

In this case, USDT is pegged to the US dollar and is typically used to minimize exposure to market volatility. When investors seek to purchase a crypto-asset they often exchange their local currency for USDT to maintain value before swapping USDT for the desired asset on a crypto exchange. 

Therefore the amount of USDT available on exchanges is a crucial liquidity indicator for other cryptocurrencies. The current drop in USDT deposits indicates a decline in demand for crypto assets which could lead to a decline in market prices. This makes it a bearish indicator.

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Since Bitcoin is the leading cryptocurrency and controls 47% of the market, it stands to be the most affected by this trend. However, if this trend shifts and USDT deposits on exchanges increase, as they did after the last low in January, the prices of bitcoin and other crypto-assets could surge. 

It should be noted that this metric is not a fail-safe bearish indicator but merely an analysis model that predicts potential scenarios. Furthermore, while the decreasing USDT deposits indicate a bearish indicator, other analyses interpret the opposite.  

When investors wish to purchase cryptocurrency, they often exchange their USDT on exchanges for the desired asset. Thus, the amount of USDT available on exchanges is a crucial liquidity indicator for purchasing other cryptocurrencies. 

The fear/greed index, a useful indicator to gauge market sentiments, is currently in the greed zone. This means investors are still bullish about Bitcoin despite the increased volatility in recent days. 

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Bitcoin Price Analysis

Bitcoin is currently hovering between $29,000 and $29,500 after a slight market correction in the past few days. It now appears to be stuck below the $30,000 physiological zone and preparing for another ascent. 

Bitcoin currently preparing to surpass the $30,000 resistance mark: source @Tradingview
Bitcoin currently preparing to surpass the $30,000 resistance mark: source @Tradingview

At the moment, the support to watch in case of a further correction is $27,000 but if the market gets bullish then Bitcoin could surpass $30,000 and hit its next resistance level of $31,000 in the coming days. 

Featured image istock, charts from glassnode and tradingview 




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