Bitcoin’s price and stablecoin inflows – Should the latter’s downtrend worry you now?

• Bitcoin’s recent uptrend correlated positively with the stablecoin exchange inflows
• These 7DMA inflows have been in decline since December

Bitcoin [BTC] hit a high of $105.8k on Friday, 17 January. The quick price gains for the world’s leading crypto came alongside strong stablecoin inflows into exchanges.

Source: CryptoQuant Insights

In a post on CryptoQuant Insights, stablecoin inflows to exchanges were observed to be rising since Monday, 13 January. The price of Bitcoin has also been trending higher during the same period.

While this seemed to be bullish in the short-term, it would be interesting to see if there were any patterns that repeated from the previous bull run. AMBCrypto also investigated the total market cap’s expansion, alongside stablecoin inflows.

Stablecoin inflows skyrocketed in November, but the trend has slowed down

Source: CryptoQuant

The 7-day simple moving average for stablecoin exchange inflows was used to smooth out the data. It revealed a series of spikes from 2021-23. These spikes represented heightened stablecoin inflows to exchanges.

The implication of greater inflows is bullish. More stablecoins sent to exchanges means there is more buying power in the market. Similarly a downturn in inflows can point towards bearish market conditions.

The 7DMA made strong highs in November following the results of the 2024 U.S. presidential election. It maintained those lofty heights for nearly a month, but has been falling since the second week of December.

This meant that despite the short-term inflows, the trend over the last six weeks has not been favorable to the buyers.

Source: TOTAL on TradingView

Comparing the stablecoin inflows to the total crypto market cap, 2021-22 saw the bull run commence and reach a conclusion in November 2021. Despite the slump in price action since then, the inflows chart showed multiple sizeable upward prongs in 2022 and also in March 2023.

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Therefore, it served to illustrate that the inflows metric does not necessarily dictate the movement of the total crypto market. Additionally, the inflows account also for newly minted stablecoins flowing to exchanges, which has steadily trended upwards over time.

Simply put, the short-term rise in stablecoins flow is encouraging. However, the metric’s downtrend since December needs to be broken for the crypto market to sustain its rally.