Key Points
- Recent weak market sentiment marked by extended Binance stablecoin outflows and increased USDT dominance.
- Analysts suggest a reversal in stablecoin flow dynamics on Binance, indicating a cautious market outlook.
The recent market sentiment in the crypto world has been weak, characterized by an extended outflow of stablecoins from Binance.
USDT dominance has also seen a spike, indicating a preference amongst investors to preserve capital amidst falling markets.
Stablecoin Flow Reversal on Binance
CryptoQuant analyst Dark Fost has noted a reversal in Binance stablecoins flow. From a +$13B inflow in November, Binance recorded an outflow of $310M in early January.
This trend mirrors the Bitcoin (BTC) market slump experienced last summer. Fost points out that a weak stablecoin inflow usually indicates weak buying strength.
However, persistent outflows, like those witnessed since mid-December, suggest a more cautious market outlook that could negatively impact Bitcoin.
Impact of US Inflation and FOMC Minutes
The weak market sentiment has been further reinforced by the sticky US inflation and the Fed’s slow rate cut path, which could potentially stall risk-on assets.
News of the US government getting approval to sell seized Bitcoin from Silk Road has also dampened market optimism.
The rise in Tether (USDT) dominance further confirms the concerns raised by Dark Fost. This indicator is inversely correlated with Bitcoin price, with recent spikes marking local tops at $108K and $102K.
Analysts such as Peter Brandt have previously warned that Bitcoin’s inverted head-and-shoulder pattern could pull it down to $75K levels if it breaks below $90K.
Whether USDT dominance will top out again above 4% and allow Bitcoin to rebound is still uncertain.
Analysts like Benjamin Cowen and CoinDesk’s senior analyst James Van Straten, however, downplay the recent Bitcoin decline as a typical January pullback during the post-halving year.
At the time of writing, the asset was attempting to stabilize above $94K.