- USDT volume decreases as the intensity of the bear market shows signs of waning.
- Strong USDT value is most desirable in China as the stronger dollar breaks through important historical CNY levels.
The cryptocurrency market has just concluded an overall bearish week, marking the second pullback so far this year.
Watching stablecoins can provide insight into how and where liquidity flows are going. USDT, one of the largest stablecoins by market cap and volume, demonstrates some interesting observations.
According to the latest data from Glassnode, USDT has dropped to its lowest monthly trading volume levels in the past 24 hours.
The last time transaction volume was this low was early in the second week of January. This was around the same time that the cryptocurrency market began to experience increased volatility.
📉 $USD Trading volume (7d MA) just hit 1-month low of 132,693,185.339 USDT
View metrics: https://t.co/7oXBoR4C4j pic.twitter.com/pwvQFFc0h3
— glassnode alerts (@glassnodealerts) February 25, 2023
USDT was still engaged in significant trading activity despite the drop in transaction volumes. The latest on-chain exchange flows reveal that USDT had a net flow of +$84.4 million. This means that there has been more liquidity inflows than outflows in the last 24 hours at press time.
📊 Daily on-chain exchange flow#Bitcoin $ BTC
➡️ $763.0 million in
⬅️ $702.3 million
📈 Net flow: +$60.7M#Ethereum $ ETH
➡️ $567.4 million in
⬅️ $415.8 million
📈 Net flow: +$151.6 million#tether (ERC20) $USD
➡️ $806.2 million in
⬅️ $721.7 million
📈 Net Flow: +$84.4M https://t.co/dk2HbGwhVw— glassnode alerts (@glassnodealerts) February 25, 2023
An important point to note is that there was still a significant amount of foreign exchange outflows. The latest FX inflows recorded averaged just over US$806 million, while FX outflows totaled US$721.65 million.
Source: Glassnode
One potential reason for this result is that the market has maintained an overall bearish sentiment, so many traders are exiting their positions in favor of stablecoins.
As such, there has been an increase in demand for USDT on and off exchanges. Address flows give a better picture of the level of demand for USDT in the market.
Demand for USDT remains high
The number of receiving addresses was higher in the last 24 hours at 68,969 addresses. In comparison, shipping addresses came in at 52,675.
As expected, during a bear market, the higher number of receiving addresses confirms that more traders are choosing to hold stablecoins. A good example of this is the strong demand for USDT in China.
USDT fiat currency trading price in China has surpassed 7 CNY. As market expectations for a slowdown in the Fed’s interest rate hike have weakened, the US dollar index has recently strengthened in stages.
—Wu Blockchain (@WuBlockchain) February 25, 2023
The value of USDT has recently surpassed the 7 CNY price level. This was largely courtesy of greater dollar strength, which makes the equivalent USDT value more desirable to hold, especially during a bear market.
Source: Glassnode
An important point to note is that there is also a lot of selling pressure for USDT. This suggests that there is a notable reaccumulation taking place at discounted prices.