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- The recent weak sentiment was marked by extended Binance stablecoin outflows.
- USDT dominance also spiked as investors opted to preserve capital as markets tanked.
This week’s risk-off sentiment has unnerved some crypto investors, forcing most to lock-in profit or opt-out altogether to preserve capital.
According to pseudonymous CryptoQuant analyst Dark Fost, the reversal of Binance stablecoins from a +$13B inflow in November to record an outflow of $310M in early January, mirrored last summer’s BTC market slump.
He stated,
“We are currently witnessing a reversal in stablecoin flow dynamics on Binance. This type of trend reversal was last observed in May 2024, right before Bitcoin’s sharp price decline during the summer.”
Source: CryptoQuant
Bitcoin market on edge
Fost added that a lukewarm stablecoin inflow typically indicates weak buying strength.
However, he warned that persistent outflows, as seen since mid-December, underscored market caution and could dent the Bitcoin [BTC] outlook.
“While a reduction in stablecoin inflows signals weakening a buying pressure, outright stablecoin outflows indicate a more significant market shift, with investors leaning toward caution.”
Source: CryptoQuant
The weak market sentiment was triggered by sticky U.S. inflation, reinforcing the Fed’s slow rate cut path, which could stall risk-on assets.
Additionally, hawkish FOMC Minutes and news of the U.S. government reportedly getting approval to sell seized BTC from Silk Road muted market optimism.
The rising Tether (USDT) dominance also confirmed Dark Fost concerns. The indicator is inversely correlated with BTC price, and the recent spikes marked the local top at $108K and $102K.
In fact, some analysts, like Peter Brandt, previously warned that BTC’s inverted head-and-shoulder pattern could drag it to $75K levels if it breaks below $90K.
Source: TradingView (USDT dominance vs BTC performance)
Whether the USDT dominance will top out again above 4% and allow BTC to rebound remains uncertain.
However, Benjamin Cowen and CoinDesk’s senior analyst James Van Straten downplayed the recent BTC decline as a typical January pullback during the post-halving year.
At press time, the asset attempted to stabilize above $94K.
