Volatility in Crypto Markets: What Happens After a $1 Billion USDT Withdrawal?

Bitcoin Rises, But Do USDT Withdrawals Signal a Market Decline?

After plunging below $50,000 during the Aug. 5 meltdown, Bitcoin (BTC) surged to above $60,000, causing cryptocurrency values to recover dramatically from last week’s turbulence. However, additional gains may be difficult to come by, at least according to one measure that has predicted recent local highs. More than $1 billion worth of Tether’s USDT stablecoin was removed from cryptocurrency exchanges on Tuesday, the largest in a single day since May, according to data from the crypto analytics firm IntoTheBlock.

In recent cases where withdrawals exceeded $1 billion, bitcoin began a downtrend soon after, suggesting investors may be adopting a risk-off stance, moving funds to safer environments like cold wallets in anticipation of market volatility,

IntoTheBlock

The Fall in DeFi Yields and Bitcoin’s Market Reaction

Stablecoin withdrawals are not always bad because users can move their money to decentralized finance (DeFi) to generate yield, even though deposits to exchanges are beneficial because they indicate new money coming in to purchase assets. Notably, according to DefiLlama data, yields for supplying USDT liquidity in DeFi pools have been falling lower. Even though Wednesday’s U.S. CPI inflation news bolstered predictions of an interest rate cut in September, bitcoin plunged to $59,000 during the U.S. trading session, totally retracing yesterday’s climb above $61,000.

Prominent cryptocurrency analyst Miles Deutscher made the observation that the price movement of Bitcoin is similar to what happened a year ago. After that, during a significant leverage flush in August, BTC fell below $24,000 from its peak at $30,000 and traded primarily sideways for two months until starting a rally in October.

Retail interest is evaporating fast, apathy amongst existing market participants, lack of clear narratives. This feels eerily similar to August-October last year.

Deutscher

For more up-to-date crypto news, you can follow Crypto Data Space.