New net flows suggest bullish momentum in the cryptocurrency market, says Bank of America. In its recent report, it identified several bullish trends in the cryptocurrency market, indicating that investor sentiment could change, leading to a trend reversal.
Bank of America concluded that the recent rise in the outflow of cryptocurrencies from exchanges and the increase in the net inflow of stablecoins signal Bullish market momentum, according to Decrypt. In the July edition of its Global Cryptocurrencies and Digital Assets report, the bank stated that “fading sell pressure” has now turned to “buying.”
This change in sentiment can also be seen in the 11% rise in the digital asset market between June 29 and July 26, despite a 56% year-to-date decline. “Investors are moving off of the sidelines as risk assets rally. Tight supply and continuous exchange net outflows indicate that investors continue to HODL,” the report reads.
The recent positive price action came during the backdrop of exceptionally strong CPIs and the Federal Reserve's decision to raise rates the most in 20 years. Therefore, Bank of America assumes that investors have adjusted to the current macroeconomic turmoil and are ready to return to risky territory.
Bitcoin and Ethereum have experienced significant inflows of funds into wallets outside of crypto exchanges. This is often taken as a bullish signal because investors tend to move assets off exchanges when they are interested in holding on to an asset rather than selling it.
The four largest stablecoins by market capitalization (USDT, USDC, BUSD, and DAI) saw net inflows totaling $1.4 billion for three consecutive weeks. Unlike the influx to exchanges from volatile cryptocurrencies such as Bitcoin or Ethereum, the influx to exchanges of stablecoins can be seen as a bullish signal. This is because stable dollar-pegged assets entering the exchange indicate that investors are entering the market looking to buy.
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Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.