Bitcoin soared to $11,000, and USDT exchange inflows hit an 8-month high

According to on-chain data provider Glassnode, Tether (USDT) exchange inflows have recently surged to their highest level in the past eight months. Yesterday, as Bitcoin (BTC) surged to $10,270, USDT exchange inflows reached a 2020 high, however, Bitcoin has continued to rise since then and is currently priced at $11,000.

USDT exchange inflows Source: Glassnode

While the research firm found that USDT held on exchanges has a negative correlation with Bitcoin prices, since USDT is the fastest and most popular way to acquire Bitcoin, USDT inflows can also be seen as a bullish sign for Bitcoin.

USDT continues to develop in all aspects

USDT has broken several records recently, recently surpassing Ripple (XRP) to become the third largest cryptocurrency by market cap, and even surpassing the $10 billion mark this month. Currently, USDT accounts for the majority of the total market cap of the stablecoin market, which recently also exceeded $12 billion.

Not only has USDT’s market cap continued to grow (along with most of its USD-based competitors), but its trading volume has recently picked up. While USDT’s trading volume is still far from its all-time highs of March 2020, BTC/USDT trading volume has picked up over the past week, driven primarily by the surge in Bitcoin’s price.

USDT-24-hour trading volume (BTC) Source: CryptoCompare

A recent report from market and on-chain analytics firm Messari suggests that USDT alone may soon surpass Bitcoin as the dominant cryptocurrency in terms of daily transaction volume.

This takes into account all USDT transferred across Ethereum, TRON, and the Omni layer, which is a colored coin protocol on the Bitcoin blockchain itself. The growth in value settled via USDT is also largely attributed to inter-exchange settlement and the decentralized finance sector.

Daily transaction value of Bitcoin and Tether. Source: Messari

Bearish outlook

The recent surge in exchange inflows, along with all other indicators regarding USDT, could indicate a bullish outlook for Bitcoin. The growing market capitalization of USDT indicates demand for stablecoins, while the increasing exchange inflows indicate demand for Bitcoin and other cryptocurrencies.

The additional demand for USDT may be attributed to the fact that only a few exchanges offer USDT-based derivatives to go long and short Bitcoin.

However, according to CryptoCompare analyst James Li, the recent USDT exchange inflows observed by Glassnode may not have such a positive impact on Bitcoin prices if considered in isolation. Li told Cointelegraph:

“Looking at the historical patterns in the chart alone doesn’t seem to send a bullish signal to me. Some previous large inflows were followed by price declines, while others had no impact on prices. The final price increase was after the big drop in March, but this time there was no drop before the price increase.”