Bitcoin’s on-chain and social metrics have long been in the spotlight, capturing the attention of traders and analysts alike. However, amidst the flurry of Bitcoin analysis, the crucial signals emanating from Tether (USDT) and USD Coin (USDC), the top two stablecoins in the cryptocurrency market, often go unnoticed. These stablecoins hold valuable insights that could foreshadow market-wide moves, providing astute traders and investors an edge.
In a recent tweet, crypto analytic platform Santiment highlighted the tendency of traders to underestimate the crucial signals emanating from Tether and USD Coin, despite the focus on Bitcoin’s metrics:
📊 While many are paying attention to #Bitcoin's on-chain & social metrics, traders continue undervaluing the important signals firing off with #Tether & #USDCoin. Read how we use #crypto's top 2 #stablecoins to see market-wide moves before they happen. 👀https://t.co/OvuiZOT4bK pic.twitter.com/bpUsTmpT9c— Santiment (@santimentfeed) July 11, 2023
Stablecoins have historically exhibited a close relationship with the broader crypto sector, making them an intriguing barometer for market trends. The behavior of Tether and USD Coin, in particular, has proven to be instrumental in predicting potential pumps or dumps across the entire cryptocurrency landscape.
One key metric to monitor is the Mean Dollar Invested Age, which serves as a “validator” of market upswings. When the curve of this metric declines, it indicates that dormant coins are being mobilized to drive future price increases, validating the upward momentum of the crypto market. Notably, movements of older coins that were previously stagnant in wallets, especially within the realm of top stablecoins, signify the intent to purchase cryptocurrencies and could be seen as a positive sign.
Another significant aspect to consider is the absolute holdings of wallets with substantial stablecoins ranging from $100,000 to $10 million. Tracking the behavior of these stablecoin sharks and whales provides valuable insights. An optimistic indicator arises when stablecoins experience a downward trend while Bitcoin prices surge, implying that significant stakeholders are converting their stablecoins into Bitcoin, consequently driving the price upwards. A bearish sign emerges when stablecoins witness a surge while BTC prices decline, indicating that influential players are selling off their Bitcoin or other cryptocurrencies and reverting to stablecoins.
Furthermore, when stablecoins are moving upward in tandem with rising BTC prices, it signifies a super bullish scenario, indicating potential fiat inflows and price appreciation without significant injections from stablecoin holders. Conversely, when stablecoins are declining while BTC prices plummet, it signals a super bearish situation, indicating a sell-off and a potential exodus from the crypto market, with funds flowing back into fiat bank accounts controlled by large stablecoin holders.
Monitoring the supply of stablecoins on exchanges as a percentage of their total supply also serves as an effective forecasting tool. Rapid movements of USDT and USDC supplies to exchanges have historically preceded market-wide price surges, as seen with USDC in March, offering valuable hints at future crypto price movements.
At press time, Bitcoin (BTC) is trading at $30601.41 with a positive change of 0.60%, according to the data from the TradingView. Despite holding its ground, BTC has been struggling to maintain momentum above the $31,000 level.
Tether (USDT) and USD Coin (USDC) are stablecoins that have a fixed value of $1.00 each. They maintain a 1:1 peg to the U.S. dollar, ensuring that these cryptocurrencies are in circulation fully backed by $1 held in reserve. In the past 24 hours, Tether has had a trading volume of $13,273,728,345, while USD Coin’s trading volume has reached $2.7 billion.
Similarly, analyzing the distribution of stablecoin supply among the top 10 largest addresses reveals if significant injections of stablecoins are occurring. Comparing the distribution among these top addresses with the overall supply on exchanges confirms that most of the largest addresses currently reside on exchanges.
While stablecoin analysis might seem mundane for much of the year, sudden anomalies in these metrics for Tether and USD Coin could provide vital alpha signals, offering unique profit opportunities for attentive traders. By staying attuned to these indicators, astute investors could gain an edge in the crypto market while others remain unaware of the potential that lies within stablecoin movements.