Bitcoin has observed a pullback down to the $58,000 level during the past day. Here’s what could be the cause behind it, according to on-chain data.
Exchanges Have Seen A Large Amount Of Tether Withdrawals Recently
According to data from the market intelligence platform IntoTheBlock, centralized exchanges have recently seen a Tether (USDT) outflow spree exceeding $1 billion.
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Investors usually keep their coins in exchanges when they want to trade them in the near future, so them making the move to withdraw their tokens potentially implies that they are interested in holding into the long-term.
For volatile assets like Bitcoin, exchange outflows can naturally be a bullish sign for this reason. In the context of the current topic, though, the asset being withdrawn is a stablecoin, so the implication for the market is a bit different.
Generally, investors store their capital in the form of fiat-tied tokens like Tether when they want to escape the volatility associated with coins like BTC. Such holders do eventually plan to venture back into the other side of the market and they may use exchanges for doing so.
When holders buy into assets like Bitcoin using their stablecoin, they naturally end up boosting their prices. As such, exchange inflows of stables can be a bullish sign for the sector.
Withdrawals of USDT and others into self-custody instead, however, can be a bearish sign for the market, as it shows the investors don’t believe they would be making a swap into the volatile side in the near future.
The latest Tether withdrawals may, therefore, be why the Bitcoin price has tumbled. This USDT exiting exchanges could even have represented fresh BTC sells, as many investors like to move into self-custody as soon as they have swapped between assets.
As IntoTheBlock has pointed out in the chart, the last two large USDT exchange outflows also had a bearish effect on BTC.
In some other news, the cryptocurrency derivatives market as a whole has seen a large amount of liquidations as a result of the volatility that Bitcoin and other coins have displayed during the past day.
Below is a table from CoinGlass that sums up the liquidations that have occurred in the latest volatile market phase.
As is visible above, around $146 million in cryptocurrency liquidations have occurred over the past day, with $120 million coming from the long contracts alone, representing more than 80% of the total.
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Interestingly, Ethereum (ETH) is the symbol that has contributed the most towards this derivatives flush and not Bitcoin like is usually the case. That said, ETH has only $6 million more liquidations than BTC.
BTC Price
At the time of writing, Bitcoin is trading around $58,800, down 4% over the last 24 hours.
Featured image from Dall-E, IntoTheBlock.com, chart from TradingView.com