Finally, Bitcoin has reclaimed the 24k level. We all survived some of the most uncertain times in crypto history, one of the most violent dips in altcoins, and still, we stand! The market has taught us many lessons in the last five months too. Now, with a reinforced optimism, let us look at the buying power left in the system, the stablecoins.

In crypto, there was no single market influencer other than Bitcoin and probably Ethereum. While the market went to hibernation mode, short-term holders and some institutional players exited the market en masse. But in this bear market, things are different. Nevertheless, many short-term holders left the crypto space out of panic due to strangulating regulations. Still, many players remained here, storing their wealth in stablecoins. 

In November 2020, tether had a $17 billion market cap, and circle USDC had a $2.8 billion market cap. These were the only stable coins in the top 15. $USDT ranked third, and $USDC ranked 12. At the same time, bitcoin was near its 2018 Bull market top and preparing for a parabolic bull market.

A year before, in August 2021, we had an entirely new market structure. Bitcoin had retraced from 64k, and the investment atmosphere was slightly negative.

Tether remained at the 3rd spot, with a $62.5 billion market cap. It is an increase of 260% in 10 months. But it was the new players who made significant progress.

USDC by then occupied rank 8 with a $27.8 billion market cap. Out of nowhere, BUSD came into the race and was occupying a market cap of $12 billion.

Surprisingly, UST and LUNA were out of the picture.

This new market structure communicated three points.

1. The growing trust in the crypto market 

2. Investors want to park their funds in crypto even when not investing.

3. There can be multiple stablecoin champions, even for different ecosystems.

These three factors were crucial in the 2021 November rally. 

Today, on 8th August-2022, USDT, USDC, and BUSD are in the top 10. Does that mean there is a lot of buying power in the system? Yes! 

When these buying walls be activated remains to be a hot topic. Last week, we discussed the market forces and their little game of finding balance. The same story applies, as there are very few changes in the macro environment. Feds can print more money and trigger another inflation wave. 

It is perhaps the best hopium shot for a bull market in a short time.

Since crypto has a lot of stablecoin reserves, that essentially points to a lot of buying power. An on-chain indicator sheds more light on the status of stablecoins. 

Exchange Inflow in Stablecoins is the number of stables flowing into the exchange wallets. On the other hand, exchange stablecoin outflow is the number of stables leaving the exchange wallets.

Now, stablecoin inflow and coin inflow are two different concepts, and that's why they have entirely different outcomes. In short, when the exchange inflow of bitcoin goes up, it may lead to a downtrend. But when the exchange inflow of stablecoins increases, it signals a reverse of the downtrend or slowing of the bear market. 

Firstly, let's consider the status of the exchange outflow. The exchange outflow in stablecoins has been relatively stable since 2020. The matrix had regular ups and downs throughout the years. 

However, in 2022 May and 2022 June, there were two big spikes in outflows.

The May spike coincides with the Luna - UST crash. Many people had to withdraw their UST from exchanges to swap for another stable asset. Some centralized exchanges experienced a liquidity crisis, aggravating the issue. 

The spike of June 2022 is, however, more organic and fascinating. It implies many players (short-term and long-term) withdraw their funds from exchanges. Why? 

It is probably because of Kucoin FUD, Indian Taxation, and other global events like WHO announcing monkeypox as a health concern.  

The spike signaled a few things to the general market.

1. A chunk of buying power has left the market, and there is no point in waiting for lower levels.

2. The fear in the market has reached the maximum pain level. 

3. People who expected 15k have bought at 18k already. Even if Bitcoin goes to 15k, they do not have the interest to buy.

Arguably, BUSD was the winner of the bear market. It not only went up in volume but also in the number of users. Binance strategically removed UST, and the USDT FUD helped BUSD to find stable ground. Although the daily volume of USDC is five times that of BUSD, it is one of the most trusted in the space. More on this later.

UST lost the narrative, lost the peg, and eventually lost its place. Along with it, the scope of algo stablecoins has taken a hit. Maybe when regulators come hard at stablecoins, decentralized stablecoins will have a revived interest from the crypto community.

With that in mind, who stands as the winner of the bear market among the investors? Of course, it is the people who did DCA in the difficult times, along with long-term holders. The exchange inflow in stablecoins confirms this idea.

Since November 2020, the exchange inflows of stablecoins have been on the rise. It added more and more buying power and more volatility to the market. More investors came to the space, and crypto became a hot topic among traditional investors.

The January 2022 crash accelerated buy the dip events. Investors deposited large sums of money, which explains the first peak. The May crash also saw increased inflows, which acted as a buying wall for bitcoin. These were whale buyers. Finally, towards the end of June, there was another spike. It points to extensive buying from whales and the bear market bottom (hopefully).

In July and August, the inflows have reduced by a magnitude. The weekly moving average is now at 2021 January levels (relatively, not exact). If everything goes well, Bitcoin can oscillate between 24k and 20k for some more months before another eventful bull market.

The weekly asset flows are an excellent tool to check whether the inflows and outflows are intra-web3. At present, web3 is not an isolated area. It is closely linked with the web2 world and its financial system. Also, hoping for a perfectly detached scenario is too much hopium.

The asset flows tell us that since July, the net asset transfer has been positive for crypto. That means more investors are transferring money into crypto, and fewer buyers are withdrawing money from crypto. It reassures the healthy state of the crypto assets.

However, investors are better off if they don't interpret the signs of reduced outflows as a pre-bull run condition. In other words, we are still in a bear market. We can sigh that the most tricky times are possibly over. But, a more conducive bullish environment is still far-off.

Finally, Bitcoin has reclaimed the 24k level. We all survived some of the most uncertain times in crypto history, one of the most violent dips in altcoins, and still, we stand! The market has taught us many lessons in the last five months too. Now, with a reinforced optimism, let us look at the buying power left in the system, the stablecoins.

In crypto, there was no single market influencer other than Bitcoin and probably Ethereum. While the market went to hibernation mode, short-term holders and some institutional players exited the market en masse. But in this bear market, things are different. Nevertheless, many short-term holders left the crypto space out of panic due to strangulating regulations. Still, many players remained here, storing their wealth in stablecoins. 

In November 2020, tether had a $17 billion market cap, and circle USDC had a $2.8 billion market cap. These were the only stable coins in the top 15. $USDT ranked third, and $USDC ranked 12. At the same time, bitcoin was near its 2018 Bull market top and preparing for a parabolic bull market.

A year before, in August 2021, we had an entirely new market structure. Bitcoin had retraced from 64k, and the investment atmosphere was slightly negative.

Tether remained at the 3rd spot, with a $62.5 billion market cap. It is an increase of 260% in 10 months. But it was the new players who made significant progress.

USDC by then occupied rank 8 with a $27.8 billion market cap. Out of nowhere, BUSD came into the race and was occupying a market cap of $12 billion.

Surprisingly, UST and LUNA were out of the picture.

This new market structure communicated three points.

1. The growing trust in the crypto market 

2. Investors want to park their funds in crypto even when not investing.

3. There can be multiple stablecoin champions, even for different ecosystems.

These three factors were crucial in the 2021 November rally. 

Today, on 8th August-2022, USDT, USDC, and BUSD are in the top 10. Does that mean there is a lot of buying power in the system? Yes! 

When these buying walls be activated remains to be a hot topic. Last week, we discussed the market forces and their little game of finding balance. The same story applies, as there are very few changes in the macro environment. Feds can print more money and trigger another inflation wave. 

It is perhaps the best hopium shot for a bull market in a short time.

Since crypto has a lot of stablecoin reserves, that essentially points to a lot of buying power. An on-chain indicator sheds more light on the status of stablecoins. 

Exchange Inflow in Stablecoins is the number of stables flowing into the exchange wallets. On the other hand, exchange stablecoin outflow is the number of stables leaving the exchange wallets.

Now, stablecoin inflow and coin inflow are two different concepts, and that's why they have entirely different outcomes. In short, when the exchange inflow of bitcoin goes up, it may lead to a downtrend. But when the exchange inflow of stablecoins increases, it signals a reverse of the downtrend or slowing of the bear market. 

Firstly, let's consider the status of the exchange outflow. The exchange outflow in stablecoins has been relatively stable since 2020. The matrix had regular ups and downs throughout the years. 

However, in 2022 May and 2022 June, there were two big spikes in outflows.

The May spike coincides with the Luna - UST crash. Many people had to withdraw their UST from exchanges to swap for another stable asset. Some centralized exchanges experienced a liquidity crisis, aggravating the issue. 

The spike of June 2022 is, however, more organic and fascinating. It implies many players (short-term and long-term) withdraw their funds from exchanges. Why? 

It is probably because of Kucoin FUD, Indian Taxation, and other global events like WHO announcing monkeypox as a health concern.  

The spike signaled a few things to the general market.

1. A chunk of buying power has left the market, and there is no point in waiting for lower levels.

2. The fear in the market has reached the maximum pain level. 

3. People who expected 15k have bought at 18k already. Even if Bitcoin goes to 15k, they do not have the interest to buy.

Arguably, BUSD was the winner of the bear market. It not only went up in volume but also in the number of users. Binance strategically removed UST, and the USDT FUD helped BUSD to find stable ground. Although the daily volume of USDC is five times that of BUSD, it is one of the most trusted in the space. More on this later.

UST lost the narrative, lost the peg, and eventually lost its place. Along with it, the scope of algo stablecoins has taken a hit. Maybe when regulators come hard at stablecoins, decentralized stablecoins will have a revived interest from the crypto community.

With that in mind, who stands as the winner of the bear market among the investors? Of course, it is the people who did DCA in the difficult times, along with long-term holders. The exchange inflow in stablecoins confirms this idea.

Since November 2020, the exchange inflows of stablecoins have been on the rise. It added more and more buying power and more volatility to the market. More investors came to the space, and crypto became a hot topic among traditional investors.

The January 2022 crash accelerated buy the dip events. Investors deposited large sums of money, which explains the first peak. The May crash also saw increased inflows, which acted as a buying wall for bitcoin. These were whale buyers. Finally, towards the end of June, there was another spike. It points to extensive buying from whales and the bear market bottom (hopefully).

In July and August, the inflows have reduced by a magnitude. The weekly moving average is now at 2021 January levels (relatively, not exact). If everything goes well, Bitcoin can oscillate between 24k and 20k for some more months before another eventful bull market.

The weekly asset flows are an excellent tool to check whether the inflows and outflows are intra-web3. At present, web3 is not an isolated area. It is closely linked with the web2 world and its financial system. Also, hoping for a perfectly detached scenario is too much hopium.

The asset flows tell us that since July, the net asset transfer has been positive for crypto. That means more investors are transferring money into crypto, and fewer buyers are withdrawing money from crypto. It reassures the healthy state of the crypto assets.

However, investors are better off if they don't interpret the signs of reduced outflows as a pre-bull run condition. In other words, we are still in a bear market. We can sigh that the most tricky times are possibly over. But, a more conducive bullish environment is still far-off.