Tether Held on Exchanges Could Help Forecast Bitcoin Bull Runs

A crypto data firm representative explained how Tether’s on chain data can potentially forecast Bitcoin’s (BTC) bull runs.

Marketing and social media director at Santiment, Brian Quinlivan, told Cointelegraph on May 7 that the percentage of USDT held on exchanges often anticipates Bitcoin’s bull runs. He explained the principles behind the analysis:

“Most USDT isn't just being taken off exchanges to be stored in wallets or cashed out through a FIAT-based platform like Coinbase. When people aren't using USDT, they most often put it in Bitcoin. And what's cool is the fact that this USDT percentage often fluctuates a few hours or days in advance of BTC's price reacting to it. So monitoring this metric in advance can end up producing a tremendous advantage by catching a sudden fluctuation early enough.”

The correlation is expected to last

Quinlivan pointed out that this correlation started a couple of years after USDT launched, once the stablecoin gained traction. Now, he explained that Tether is clearly utilized as the top price-stable token. He also states that he is confident this correlation will continue to manifest itself in the future. Quinlivan noted that the one year chart has shown a distinct and clear inverse correlation for the past 9-10 months.

Bitcoin price-portion of Tether’s USDT on crypto exchanges chart. Source: Santiment

Other interesting correlations

Quinlivan also pointed out a relationship between the amount of decentralized stablecoin, DAI, on crypto exchanges and Ether (ETH) price. He explained:

“The amount of supply of DAI on exchanges often seems to lead the way in Ethereum's price. However, this is a bit less consistent than the BTC-USDT tie, since ETH's price is more reliant on what BTC is doing at any given time.”

Lastly, the data firm rep acknowledged that other metrics are worth looking at as well. He specifically mentioned an interest in social trends, such as keywords and topic mentions on various social platform conversations. He said that — over the past couple of months — the firm observed the fear related to COVID-19 has had a direct inverse correlation to the price of BTC.

Bitcoin shows increasingly bullish signs

After a major downturn in March, Bitcoin is now increasingly showing bullish signs. As Cointelegraph reported earlier today, institutional investors appear to expect a Bitcoin bull run, given that futures on the Chicago Mercantile Exchange recently broke records.

Renewed interest in the leading cryptocurrency is also often attributed to the upcoming halving of Bitcoin’s block reward halving. This interest is not equally distributed and Cointelegraph recently analyzed which countries are the most interested in the event.