Bitcoin exchanges just saw massive Tether stablecoin deposits

Bitcoin exchanges just saw massive Tether stablecoin deposits

Nearly half a billion in Tether (USDT) inflows were recorded on April 8 across major Bitcoin (BTC) exchanges, based on Glassnode data.

Considering that the inflows, the biggest since mid-March, coincided with a minor Bitcoin pullback, it indicates that buyers could be waiting to step in following BTC’s price drop.

Stablecoin deposits into exchanges. Source: Glassnode

Is a broader Bitcoin rally brewing?

There are two major on-chain metrics that often signal a bigger Bitcoin rally is forming: BTC outflows and stablecoin inflows.

Stablecoin inflows occur when traders deposit their sidelined funds to exchanges to buy back into cryptocurrencies.

Meanwhile, large BTC outflows typically happen when high-net-worth investors withdraw their Bitcoin from exchanges to self-hosted wallets, which often suggests their intention to hold for the long term.

In one hour, more than $476 million worth of stablecoin deposits were spotted on exchanges. According to Lex Moskovski, chief investment officer of Moskovski Capital, this demonstrates that there is no shortage of capital waiting to buy Bitcoin dips.

Moskovski said:

“$476M USDT deposited to exchanges in an hour yesterday to buy the dip. Every time we dip, there is no shortage of the cash on sidelines, it seems.”

Stablecoins are seeing massive growth

On April 2, Bitfinex chief technology officer Paolo Ardoino shared that the market capitalization of Tether, the largest stablecoin in the global market, had reached $42 billion.

In the following six days, the market cap of USDT added another $2 billion, showing strong momentum.

Since Tether is essentially digital dollars that can be easily converted into Bitcoin and other cryptocurrencies, this uptrend suggests that the amount of sidelined capital in the crypto market is growing.

Theoretically, when there is a lot of sidelined cash in the market, it represents significant firepower to drive a new rally of major cryptocurrencies like Bitcoin.

When asked whether large USDT deposits could also mean that there’s a demand to cash out instead, Moskovski countered by saying that USDT deposited to exchanges typically represents an intention to buy.

He explained:

“Stable coins deposited on exchanges is for buying, mostly. Some part of it may be used for lending to leveraged traders. […] Besides, it’s bullish too as it highlights the demand for longs.”

Meanwhile, data from CryptoQuant depicts a similar trend. For instance, the all exchanges stablecoins ratio, which divides all Bitcoin reserves on exchanges by stablecoin reserves, is rising once again, suggesting that investors could be reentering the market.

Visa supports transaction settlement with USDC stablecoin – TechCrunch

Payment card network Visa has announced that transactions can be settled using USD Coin (USDC), a stablecoin powered by the Ethereum blockchain. Crypto.com is the first company to test the new capability with its own Visa-branded cards.

USDC is a stablecoin co-founded by Circle and Coinbase and by managed the Centre consortium. As the name suggests, USDC is a cryptocurrency that follows the value of USD. One USDC is always worth one USD — hence the name stablecoin.

In order to make sure that the value of USDC remains stable, USDC partners keep USD on bank accounts every time they issue new tokens. Those accounts are audited to make sure that there are as many USDC in circulation as there are USD in those accounts.

So why do stablecoins exist even though money is mostly digital these days? Like other crypto assets, stablecoins present some flexibility when it comes to sending, receiving and storing value. You don’t need a bank account and everything can be easily programmable. And you don’t need to support legacy systems, integrate with banks and pay transaction fees to other financial institutions.

While USDC originally started as a token on top of the Ethereum blockchain, USDC also supports two other blockchains — Algorand and Stellar. Visa has chosen to focus on the Ethereum variant of USDC for now.

The payment company already supports 160 currencies across the globe. That’s why you can seamlessly use your Visa card when you travel abroad. You’ll see a card transaction in your home currency on your card statement, but the merchant gets paid in their own local currency.

Thanks to a partnership with Anchorage, Visa is adding support for its first digital currency. Anchorage recently received a federal banking charter and is positioning itself as a digital asset bank. Visa was probably looking for a trustworthy partner for this program. As Anchorage got a thumbs-up from regulators, the partnership makes sense.

For Crypto.com, it means that it can send USDC directly to Visa. For instance, if a Crypto.com customer holds USDC in their wallet and makes a card transaction, Crypto.com doesn’t have to first convert USDC tokens to USD.

It can send USDC to Visa’s Ethereum wallet address at Anchorage to settle the transaction. The merchant then gets paid by Visa in their own currency. Visa says there will be more partners down the road in addition to Crypto.com.

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VC Backed Billion-Dollar Stablecoin Project Fei Protocol Falls Below the USD Peg – Bitcoin News

VC Backed Billion-Dollar Stablecoin Project Fei Protocol Falls Below the USD Peg

The new decentralized finance (defi) stablecoin project called Fei had some issues this week after the 1:1 USD pegged token dropped well below its targeted $1 value. The Fei project was supposed to be similar to Maker DAO’s algorithmic DAI stablecoin and it was backed by major venture capital firms.

Fei Protocol Market Price Drops to $0.73 and the Stablecoin Fei’s Bid Slides to $0.136

On social media and forums, crypto advocates have been discussing the defi project called Fei after it lost its peg with the U.S. dollar this week. Currently, a single fei (FEI) is exchanging hands for $0.76 per unit but the price sunk lower than current exchange rates. Coingecko data shows a single FEI dropped to a market price low of $0.73 per token on April 7, 2021.

1 FEI = $0.136, @rleshner is down 80% from his bullish buying price. I think one takeaway is big names mean nothing. pic.twitter.com/xGiwKqUUON — banteg (@bantg) April 7, 2021

However, the Fei protocol’s bid hit $0.136 and crypto supporters started talking about the situation. Avalanche executive Emin Gün Sirer noticed the coin lost considerable value and spoke about the concept a great deal.

“FEI dropped down to $0.136. In the process, it should have taught everyone a few lessons about stablecoin design and, perhaps, crypto investing,” Emin Gün Sirer tweeted. FEI/TRIBE was a two-coin algorithmic stablecoin, with a twist. The twist was flawed from the start and it should have been possible to predict that this idea would not work,” he added.

The Avalanche founder and CEO continued:

In a typical two-coin algorithmic stablecoin, you have one coin, FEI, trying to maintain the peg, while the other one is used [to] absorb the volatility. Algorithmic stablecoins work very well when the demand for the coin is so high to be over the peg: you just mint more FEI to bring the price down to the peg. The actual challenge lies in what to do when demand is lagging and price is low.

Not the First Stablecoin to Drop the Peg

A stablecoin’s biggest job is to maintain its peg and if it doesn’t then it can be a disaster in the marketplace. In the spring of 2019, Bitcoin.com reported on how the algorithmic stablecoin DAI struggled with its peg. Other popular stablecoins like tether (USDT) and USDC fluctuate but only by a couple of pennies or so either above or below depending on demand.

There have been other stablecoin failures in the past like when investors lost money with nubits (USNBT). The token remained pegged to the USD for quite some time after launch, until June 9, 2016 when it dropped well below the dollar peg. Today the so-called stablecoin nubits (USNBT) is only worth $0.22 per unit.

In more recent times, in November 2020, the OUSD stablecoin issuer, Origin Protocol suffered from a flash loan attack and the coin lost its peg. At press time, Coingecko stats show fei (FEI) has a fully diluted valuation of around $1.8 billion. Fei supporters and investors are confident the $1 target will be fixed in time.

What do you think about the issues with the Fei protocol stablecoin and how it lost its peg with the USD? Let us know what you think about this subject in the comments section below.

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