- The amount of Tether on the exchange has increased by over 7.1% according to Sentiment.
- This could signal stablecoin’s readiness to rally after a disappointing period.
- Even though this is an accumulation period, it is expected that the investors will be looking for an opportunity to deploy leading to a crash as the market develops.
Crypto has seen a lot of activities in the last couple of months that have somehow prevented Bitcoin from hitting the $30,000 mark. From onslaught by the US Security Exchange Commission to failure by some of the largest players in the industry including FTX, as well as class-action lawsuits and criminal prosecution of some of the big boys. The last two years have seen a lot happen in the crypto space
It seems that after a period of poor performance that has characterized the crypto market on the backdrop of negative news, data suggests that investors have become bullish in their approach. For example, this week saw a transfer of two $50 million USDT to a tether stablecoin account just a few minutes apart.
On-chain data tracker Santiment has reported the accumulation of Tether’s USDT stablecoin by crypto investors. It is reported by the tracker that the total amount currently being held by the exchange has risen significantly.
Santiment posted that “The amount of Tether on exchanges has picked up, increasing from 17.6% to 24.7%, approximately the highest amount of stablecoin buying power in 6 months. The 10 largest addresses have also upped their $USDT holdings from $7.30B to $9.42B in 3 months”
The report says the cumulative amount held across top exchanges saw a jump of 7.1% of stablecoin circulating supply. The top 10 largest wallets saw their combined holding grow from $7.23 billion to more than $9.42 billion in 3 months.
Analytical data from trackers could be a great pointer to the direction of the market, it shows investors’ confidence and buying power as well as risk appetite. As USDT grows to an all-time high, this may be a signal that the market is getting ready to rally in 2023 like never before after a period of slump.
Accumulation Stage
Although the crypto market is still largely in the accumulation phase amid the latest price movement, analysts are pointing out that a bull run might not be that far off. That has to do with an uptick in exchange holdings of the stablecoin Tether (USDT), a metric that has historically coincided with fresh opportunities for crypto investors
Why Stablecoins?
The world of cryptocurrency is characterized by high volatility and risk, stablecoins sometimes emerge as a safe pair of hands in the turbulent market of crypto because of their ability to be backed by established currencies such as the US dollar or Swiss franc or commodities such as crude oil, or precious metals such as gold. The underlying assets anchor the stablecoin’s value and give investors a reassuring sense of stability for example Paypal stablecoin (PYUSD) was listed in the singapore-based Crypto exchange and was included in the New York State Department of Financial Services “green list” of accepted cryptocurrencies, indicating its stability and reliability.
Common types of stablecoins are Fiat-Backed stablecoins which are backed by fiat currency for example Tethe (USDT) which is backed by a reserve of US dollars. Crypto-Collateralised Stablecoins which are backed by other cryptocurrencies and Algorithmic Stablecoins which maintain their stability based on algorithms, for example, TerraUSD (UST). Both stablecoin types remain outside of regulations
Some traditional financial firms and banks have also launched their stablecoins, including; PaypalUSD backed by U. S. dollars in 2023, and IBM backed by FDIC-insured banks in 2019 among others. Analysts predict that once regulatory frameworks come into force, traditional banks will enter the stablecoin market and will win because of their existing compliance and legal functions. Different markets are currently working on their regulatory frameworks such as MiCA regulations adopted by the European Union, which is a harmonizing regulatory framework for the crypto-asset market and which will apply to both traditional institutions in the financial sector and new players emerging in the crypto space.
In Conclusion
Stablecoin is in the accumulation stage, crypto investors are expected to wait for a good time to deploy, this is expected to send the market into a crash. Investors will then seize the opportunity to buy at a discount, enabling the market to form support and prices to begin to rally once more.
