Home Insights 2 Reasons Why Big Inflows Of USDC Are Incoming

2 Reasons Why Big Inflows Of USDC Are Incoming

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  • More than 2.4 billion USDC coins flew into exchanges on May 15, the highest in the stablecoin’s history.
  • Over the last week, USDT’s market cap has dropped by more than 4%.

Stablecoins were the talk of the town last week after Terra’s algorithmic stablecoin UST lost its peg. As a result of this event, several major trend shifts took place in the crypto industry, especially with respect to stablecoins. On-chain data from Crypto Quant reveals that the inflow volumes of the second-biggest stablecoin, USDC increased significantly over the last few days. 

As we can see in the chart below, more than 2.4 billion USDC coins flew into exchanges on May 15, the highest in stablecoin’s history. The spike in interest for stablecoin can be attributed to two reasons.

Reason 1: Growing Negative Sentiment Around USDT

With a market capitalization of $74 billion at the time of writing, USDT is the biggest stablecoin in the industry. However, the giant has been on the receiving end of criticism in the past because of its alleged role in manipulating the price of Bitcoin. Due to this, crypto users have been slowly moving out of the USDT to lesser controversial stablecoins like USDC and BUSD. 

However, after Terra’s UST lost its peg last week, this process accelerated as more and more investors dumped USDT in panic. Over the last week, USDT’s market cap has dropped by more than 4%.

Source: Trading View

These users either cashed out in fiat or swapped USDT for other stablecoins. Since USDC comes next in line to USDT in terms of market capitalization, many market participants might have bought USDC and moved it to exchanges to buy cryptos, hence causing the spike in its inflow volumes.

Reason 2: Anticipation Of A Reversal In Price Action Of Broader Crypto Market

At the time of writing, BTC was trading at $30,000, down by 56% from its all-time high of $69,000. At the same time, various popular altcoins like SOL (the native token of Solana) and XRP are down by more than 80% from their peak price. 

Many market participants are willing to buy at these low prices and after BTC bounced from the $26,000 level, buying momentum increased sharply.  Therefore,  to buy the tokens at cheaper valuations, investors are moving stablecoins like USDC to exchanges. History tells us that these spikes in USDC inflows have come at market bottoms.

Source: Crypto Quant

Looking at the data, we can conclude that USDC’s dominance in the stablecoin industry rose following the recent events in the crypto industry. In the coming days, investors should keep in mind that there has been a massive influx of stablecoins to exchanges, so we may see significant buying.

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