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Stablecoin Flows to Crypto Exchanges Bode Well for Market Recovery: Bank of America

Stablecoin Flows to Crypto Exchanges Bode Well for Market Recovery: Bank of America

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Stablecoin exchange earnings are on the rise, which could mean the crypto market is headed for a potential recovery, Bank of America researchers say.

In a report on Friday, analysts Alkesh Shah and Andrew Moss said that while the digital asset behaves like a “risk asset,” the amount of stablecoins flowing into exchanges was $490 million in the week before the report — a 58% increase over seven days and the third week in a row. .

That’s a healthy sign, as the report says “people are using them for real-life use cases like payments/shipping.”

Stable coins are cryptocurrencies backed by fiat currencies such as dollars or other real-world assets.

People use them to quickly enter and exit positions in other coins or tokens when trading without having to convert hard currency like US dollars.

The Bank of America report added that “for three straight weeks [stablecoin] inflows indicate that investors may selectively increase exposure to digital assets when hedging.”

Crypto markets have suffered this year – along with US stocks – as investors put their money into assets considered safer, such as the US dollar, and avoid risk.

Cryptocurrencies are generally considered risky assets. Bitcoin, the largest digital asset by market cap, has performed largely like a tech stock this year, according to Arcane Research show. This is different from how proponents of the asset claimed it would behave – calling the cryptocurrency an “uncorrelated commodity” or an inflation hedge.

It is down 72% from an all-time high of $69,044 to $19,133 today, according to CoinGecko.

Disclaimer

The views and opinions expressed by the author are for information only and do not constitute financial, investment or other advice.

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