The crypto market is currently stuck in a rut after a sustained spell of poor performance following the spread of the Covid19 crisis. Bitcoin and other cryptocurrencies have failed to recover fully from the flash crash in which over $100 billion of the total market cap was erased within days.
Since making an initial recovery from the massive plunge, the crypto market remains in a state of suspense and without many signs of a significant turnaround in fortunes. Well, at least until now.
Research analyst Bloqport observed that investors are holding their funds in stablecoins waiting for the right moment to make a jump into the crypto markets. More precisely, investors are holding over $7 billion in stablecoins across multiple crypto exchanges as they look for signals from the market. According to Bloqport, these funds could create a strong bullish pressure in the coming days causing cryptocurrency prices to surge massively.
The amount of funds held in stablecoins has risen by more than $1.5 billion in the past two months. As we had previously reported total stablecoin holdings across all exchanges amounted to $6 billion at the end of January.
Back then, it was expected that these funds were set to be splashed in the crypto market. However, this did not happen as investors remained skeptic about the near term effects of the cryptocurrencies.
The increase in stablecoin holdings is an indicator that investors continue to hedge their investments in such times of great uncertainty rather than liquidate them to cash and fiat currencies.
Stablecoins are a great hedging instrument in the crypto markets as they help investors to retain their investment in digital currency format. They help investors to stay strategically positioned to take advantage of the opportunities that arise from the market.
Stablecoins are an important medium as investors can easily hold their wealth without being exposed to the volatility of the crypto market. They are also easy to convert, exchange, and withdraw as compared to fiat currencies. This makes them the preferable mode of hedging among investors while they scout the market for opportunities.
Therefore, the increasing amount of stablecoins is a bullish signal indicating that this huge amount could easily flow in the crypto markets once the right conditions prevail.
Given its current state, the crypto market could do with that $7 billion. For now, it is a matter of when, not if.
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