Turning Tides: Crypto Market Witnesses Net Capital Inflow for the First Time in 17 Months


Stablecoins Surge and Market Sentiment Shifts Amidst Bitcoin’s Rise

  • The crypto market experiences a significant shift with a net capital inflow, breaking a 17-month trend of outflows.  
  • Tether (USDT), USD Coin (USDC), Binance USD (BUSD), and Dai (DAI) witness a positive 90-day net change, suggesting increased liquidity and potential capital inflows.
  • Bitcoin’s doubling to over $35,000, coupled with expectations of U.S. regulators approving a cryptocurrency ETF, contributes to the positive market sentiment and observed capital influx.

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The current state of the crypto market is witnessing a noteworthy shift as it experiences a net capital inflow, a phenomenon unseen for the past 17 months. This influx of capital is particularly intriguing as it marks a departure from the prolonged trend of outflows. 

Stablecoins, tether (USDT), USD Coin (USDC), Binance USD (BUSD), and Dai (DAI), have played a pivotal role in this development. Since 2020, these stablecoins have been integral in funding cryptocurrency purchases, serving as a financial backbone for investors. The current surge in their supply indicates a potential surge in buying pressure and liquidity within the market. 

Of significance is Glassnode, a leading blockchain analytics firm, whose meticulous tracking of stablecoins provides crucial insights. The focus on the 90-day net change in the supply of these stablecoins serves as a barometer for understanding the evolving dynamics of the crypto market.

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Current Market Dynamics and Positive Turn in Stablecoin Supplies

Glassnode’s data reveals a compelling shift in the 90-day net change in the supply of the top four stablecoins. The positive turn in this metric, a first since the collapse of Terra in mid-May 2022, suggests a change in market sentiment. This shift is not merely numerical but holds substantial implications for the crypto landscape.

The positive turn in stablecoin supplies signifies more than just an increase in liquidity. It serves as a potential indicator of capital inflows, signaling a renewed interest and confidence in the crypto market. Reflexivity Research, in an email to subscribers on Nov. 14, further validates this perspective, noting the positive trend as a sign of increased liquidity and a potential harbinger of capital inflows.

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Historical Context and Market Outlook

The recent surge in Bitcoin’s value, doubling to over $35,000 this year, aligns with expectations of U.S. regulators approving a cryptocurrency exchange-traded fund (ETF). This surge contributes to the positive market sentiment, acting as a driving force behind the observed capital inflow.

Examining the historical context, the negative turn in May 2022, triggered by the collapse of Terra’s LUNA token, played a pivotal role. This event led to a downturn in the percentage change, marking a period of uncertainty and loss in investor wealth. Subsequent months saw a continuation of this negative trend, with bankruptcies, confidence issues, and events like the FTX exchange adding to the market’s challenges.

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