The current cryptocurrency market rally that began in mid-October is more of an inflection point than a year-end rally.
With optimism surrounding possible approvals of more than half a dozen Bitcoin spots [BTC], although exchange-traded funds (ETFs) are reaching a peak of enthusiasm, most current analysis will tell you that the worst of the bear market is behind us.
The flowering of the end of the year
Global market capitalization has increased 34% since mid-October, adding nearly $360 billion as of press time, according to CoinMarketCap data seen by AMBCrypto.
Source: CoinMarketCap
With rising valuations, trading activity across the market saw a sharp shift. Daily volumes have averaged close to $50 billion over the past month, a welcome respite from the $25 billion to $30 billion recorded over the past two quarters.
Are stablecoins critical to market rebound?
On-chain analytics firm Santiment highlighted critical developments that could have significantly helped the ongoing rally.
Since the period from August 19 to October 16, around 3.54% of Tether stablecoins [USDT] The circulating supply was deposited in the stock exchanges. In absolute terms, this represented a leak of over $3 billion worth of USDT tokens.
Source: Sentiment
Additionally, 0.72% of the total USD Coin supply [USDC] entered the exchanges simultaneously.
Usually, such large inflows act as bullish signals for the market. This is because investors who send stablecoins are likely doing so to purchase other cryptocurrencies.
As is well known, stablecoins are the primary way for non-fiat crypto exchange traders to enter and exit trades. Stablecoins allow traders to maintain their fiat value without going off-chain and withdrawing money.
Therefore, increases in stablecoin deposits are a precursor to solid trading activity in the market.
The subsequent rally, which began mid-October, supported the above reasoning.
However, as most stablecoins converted to other cryptocurrencies, their exchange supply decreased. From 26.74% on November 9, USDT deposits on trading platforms plummeted to 22.13% at press time.
Examining the events, Santiment noted,
“The return of USDT and USDC to exchanges will be crucial for market capitalizations to continue rising during the last five weeks of 2023.”
The circulating supply of ERC-20 stablecoins has seen a notable increase over the past two weeks, according to CryptoQuant research conducted by AMBCrypto. A continued rise in the market capitalization of stablecoins would support the notion of a market recovery.
Source: CryptoQuant