Reserves on exchanges rising for Tether (USDT): bull market coming?

New updates on the on-chain situation of cryptocurrencies: Tether (USDT) is seeing an increase in its presence on exchanges, giving positive stimuli for increased market volatility.

Meanwhile, BTC is moving in the opposite direction and marking multi-year lows in the reserves on exchanges. 

Are we about to enter a bull market?

We delve deeper in this article.

Tether (USDT) reserves on exchanges are rising while Bitcoin reserves hit multi-year lows

Good news for the crypto market is emerging from on-chain data: the reserves on exchanges of Tether USDT (ERC-20), the largest stablecoin by market capitalization, are on the rise.

Specifically, we have been seeing a gradual increase in the presence of USDT on crypto exchanges since March, but from June onward there has been an acceleration of this trend.

Generally these trends signal a bottom in prices in assets such as Bitcoin and Ethereum and the beginning of a bullish market trend.

In fact, we can observe that in the last bull run, Tether (USDT) reserves began to increase in the early days of January 2021, right along with the rally of all crypto assets in the sector.

A large stablecoin presence within exchanges is positive for market bulls, who can count on more liquidity to make purchases and push prices upward.

Parallel to this interesting data for Tether (USDT), we must necessarily point out the opposite trend of Bitcoin, which is scarce as a reserve in many centralized exchanges such as Binance, Kraken, Coinbase, Okx, and Bybit.

This figure can be interpreted in two different ways.

On the one hand, it signals that HODLers are running short of liquid BTC available for trading, increasing the likelihood of a crypto supply shock and price pump.

On the other, a low number of coins in the exchanges opens the door to scenarios of unexpected high volatility and possible manipulation.

Right now there are only 2,252,000 BTC left in the exchanges: such a low level has not been observed since February 2018.

As mentioned, while exchanges are increasing their share in USDT, Bitcoin holders have not succumbed to recent FUD attempts by recording the highest level ever for the cryptocurrency’s illiquid supply.

In detail, according to data from “Ark Invest,” about 70% of Bitcoin’s circulating supply has not moved from the wallets of the cryptocurrency’s backers for at least a year.

This represents one of the main reasons why very few BTC are seen on exchanges earmarked as reserves.

Digital gold is becoming increasingly valuable, and its HODLers have become highly wary of ceding it to whales. 

Should the trend continue at this rate, before long there will be a real war to grab the last liquid satoshi on the market, with obvious positive repercussions for the value of crypto.

Tether (USDT): exchange reserve data in contrast to other ERC-20 stablecoins

If cryptocurrency exchanges are seeing increases in Tether (USDT) reserves, we cannot say the same for the rest of the stablecoin sector, whose presence has declined significantly since November 2022.

In detail, $18.9 billion has evaporated from crypto marketplaces since that month, even in the face of a $3 billion increase in Tether USDT.

Hence, while we can rejoice that the market’s largest stablecoin is overflowing the exchanges, we should be concerned that the rest of the cryptocurrencies still to the dollar are at their lowest levels in years, which have not been seen since April 2017.

However, this figure has to be put in relation to the delicate situation in the stablecoin market and the general low liquidity in recent months.

In particular, of the 18.9 billion that have been wiped out since November, we should know that more or less 17.9 billion belong to BUSD, Binance’s stablecoin whose issuance has been banned by the SEC, with issuer Paxos having to stop minting new coins.

As of November 2022, BUSD on the Ethereum blockchain was worth $21.6 billion while today it has only $3.6 billion: a huge shrinkage!

In a delicate context like this, where different dynamics intersect with each other, it becomes difficult to make an analysis of how all this might affect the prices of the cryptocurrency sector.

The emergence of Tether (USDT) is positive for the markets while the collapse of BUSD is obviously viewed negatively.

Net of the considerations made, we can say that at this particular time, given also the data on Bitcoin, the positive trend remains intact, with the odds benefiting for a rise in the coming months.

In any case, those who are really benefiting in such an environment are the two coins Teher (USDT) and USD Coin (USDC), which together are now worth 83.5% of the capitalization of all stablecoins on Ethereum.

How much longer until the bull market?

Although the on-chain situation seems to reassure crypto investors with an increase in the number of Tether (USDT) within exchanges and a parallel reduction in the share of BTC, it is still too early to shout for a bull market.

The macroeconomic situation is still very uncertain: with 92.4% probability (CME data) the Fed will raise interest rates in July by 25 basis points in what should technically be one of the last such moves before the start of expansionary monetary policy in early 2024.

The market may be discounting in advance the FED’s intentions, citing a strong labor market and subdued inflation, but as history teaches us, we cannot trust central banks to do good and bad as they see fit.

Should a new capital inflow into speculative markets and a reduction in interest rates on government bonds be arranged, there will also be a need to observe what the timing of such a move will be.

In addition, there is now at stake the issue of the spot Bitcoin ETF, which, if it were to be approved, would spur cryptocurrency price growth and entry into the sector by many institutional players.

In any case, there is no certainty yet, with the SEC possibly delaying its decision until March 2024.

Regarding the timing of the bullish market, this is not expected to come before 2024, hence at this precise moment it is better not to be too exuberant.

In this regard, Binance CEO Changpeng Zhao, in an AMA on Twitter revealed what are his predictions for the timing of the bull market for Bitcoin, which will arrive by the end of 2024 and explode positively in 2025.

If we look at the previous bull cycles of 2017 and 2021, we realize that following the bottom of the previous bear market, there was an accumulation period of about 500 days before an actual rise in Bitcoin prices.

While waiting for the 4 halving of digital gold to take place, we remain on our toes by monitoring the performance of exchange reserves in Tether USDT and BTC, whose variations form the foundation of the next market price movement.