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Coinbase Sees Largest USDC Inflow Ever, What This Could Mean For Bitcoin

On-chain data shows Coinbase has just witnessed its largest USD Coin (USDC) inflow. Here’s why this may be relevant for Bitcoin.

Coinbase Has Just Seen A $1.4 Billion USDC Inflow

As pointed out by analyst Maartunn in a post on X, a large amount of USDC has flowed into Coinbase during the past day. The on-chain indicator of interest here is the “exchange inflow,” which keeps track of the total amount of a given asset entering into the wallets associated with a centralized exchange or group of platforms.

A spike in the exchange inflow can indicate that investors are interested in trading away the cryptocurrency. In the case of an asset like Bitcoin, such a trend can naturally be a bearish signal for the price.

In the context of the current discussion, though, a stablecoin is of focus. While USDC exchange inflows would also imply that the holder wants to sell the asset, the transaction wouldn’t affect the price since, by nature, the coin always remains stable at around $1.

This doesn’t mean that the sale of USD Coin isn’t of interest to the cryptocurrency sector as a whole, however. If investors are swapping stable coins in favor of volatile coins like BTC, then the prices of these latter assets would observe a buying effect.

Now, here is a chart that shows the trend in the USDC exchange inflow over the past month:

USDC Exchange Inflow

The above graph shows that the USDC exchange inflow has just registered a huge spike. According to Maartunn, this inflow was headed towards the cryptocurrency exchange Coinbase.

In total, $1.4 billion worth of the stablecoin has entered the platform’s wallets with this inflow, the largest the exchange has ever observed. Given the extraordinary scale, this could prove to be quite bullish for Bitcoin and others if the entity behind the inflow is planning to go on a buying run with this dry powder.

There also exists the scenario, however, where the whale actually intends to trade away the USD Coin stack in favor of fiat rather than using it to buy other cryptocurrencies. In such a case, a net amount of capital would be exiting the sector, which would be a bearish sign.

It now remains to be seen whether the massive USDC deposit indeed ends up causing any noticeable fluctuations in the volatile side of the market, particularly in the price of Bitcoin.

Bitcoin Price

Bitcoin had observed sharp bullish momentum earlier to cross above the $70,000 level, but since then, the asset has fallen back to sideways movement, with its price remaining unchanged.

Bitcoin Price Chart

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This Metric Hinted At The Bitcoin Retrace In Advance

The trend in the total supply of the stablecoins may have hinted in advance that the Bitcoin rally wouldn’t last too long.

Bitcoin Stablecoins Supply Hasn’t Moved Much Recently

An analyst in a CryptoQuant Quicktake post explained that the latest news has been unable to make the stablecoins supply budge. The “stablecoins supply” here refers to the total circulating supply of all stablecoins in the sector.

Generally, investors use stables to escape the volatility associated with most coins in the rest of the cryptocurrency sector. Thus, whenever this metric rises, new tokens of the stablecoins are being minted because there is a demand for converting to them from the other assets or fresh demand is coming into the market.

Such investors who seek safety in these fiat-tied tokens usually do so because they don’t want to exit the cryptocurrency sector completely; they only require a temporary place to station their capital.

When these holders eventually find that the prices are right to jump back into the volatile coins like Bitcoin, they swap their stablecoins into them, thus putting buying pressure on their prices.

Now, here is a chart that shows the trend in the stablecoins supply over the past year:

Stablecoins Supply vs Bitcoin

In the graph, the quant has marked a specific correlation between the Bitcoin spot price and the stablecoin supply. It would appear that all the major increases in the former during the past year have come following rises in the latter metric.

There are three instances of this trend in this period: the first formed before the January rally, the second before the March rebound, and the third before the June surge.

From the chart, it’s apparent that the price increase in the asset wasn’t caused by the increases in the supply of the stables but rather the decline in them that followed afterward.

The increases in the supply of the stablecoins likely occurred because of fresh capital injections. When this new capital was deployed into Bitcoin and the others (when the indicator declined), the assets obtained the fuel for their rallies.

With the most recent rally in the asset instigated by the news of Grayscale’s victory against the US SEC, there was no such pattern in the supply of these fiat-tied assets.

This may have been one of the early signs that the rally wasn’t backed by constructive market growth, as the stablecoins supply has only been moving sideways. The Bitcoin retrace below the $26,000 level may have only been a natural consequence of this weak structure.

BTC Price

Bitcoin had earlier fully retraced the gains of the Grayscale rally, but it would appear that the decline isn’t over just yet, as the asset has now gone below the $26,000 level it had been at before the surge.Bitcoin Price Chart