Bitcoin Price Could Drop as Crypto Exchanges Experience $1B USDT Withdrawal

Bitcoin experienced a downward trend following USDT exchange outflows exceeding $1 billion earlier this year, indicating a shift to a risk-off stance by investors, according to insights from IntoTheBlock. The current market behavior is reminiscent of last year’s pattern when bitcoin traded sideways for two months after a significant drop in August.

In response to the recent market turmoil, cryptocurrency prices saw a sharp rebound, with bitcoin climbing back above $60,000 after dropping below $50,000 during the crash on August 5. Despite this recovery, there are concerns about the potential for further upside, as a key metric has previously signaled approaching local tops.

IntoTheBlock highlighted a notable event where over $1 billion of Tether’s USDT stablecoin was withdrawn from crypto exchanges in a single day, the largest outflow since May. Such large withdrawals historically preceded bitcoin downtrends, suggesting a move towards safer environments like cold wallets amid anticipation of market volatility.

Interpreting the data reveals nuances, as stablecoin deposits signal fresh funds for asset purchases, while withdrawals may indicate a shift to decentralized finance (DeFi) for yield generation. Notably, yields from providing USDT liquidity in DeFi pools have been decreasing, as indicated by DefiLlama data.

During the U.S. trading session, bitcoin retraced to $59,000, undoing the previous surge above $61,000, despite the U.S. CPI inflation report meeting expectations for an interest rate cut in September. Looking at historical trends, August and September have often yielded negative monthly returns for bitcoin, as indicated by data from CoinGlass.

Crypto analyst Miles Deutscher drew parallels between the current bitcoin price action and last year’s scenario, where a similar downtrend was followed by a period of sideways movement before a subsequent rally. Observing the current market sentiment, Deutscher noted a decline in retail interest, growing apathy among existing participants, and a lack of clear narratives, drawing comparisons to the market conditions from August to October of the previous year.