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A key measure of trade for top stablecoin Tether (USDT) hit its highest level this year, indicating an elevated level of demand. The data could imply two potential scenarios for the crypto industry, based on USDT’s role as a trade facilitator and as a safe haven.
According to data from crypto research firm Santiment, daily active addresses, ie, the number of unique users that traded the token in a single day, spiked to over 83,000 on Thursday, and also hit 74,000 on Saturday, with the former being its highest level since early-December.
The data indicates that several distinct traders appeared to be accumulating the world’s largest stablecoin. Tether’s positive, albeit limited performance last week also indicates that users are buying into the token.
But increasing USDT accumulation has several implications for the crypto market. The two most likely scenarios are:
Volatility set to rise
USDT is used extensively in trading other crypto tokens, given its near 1:1 peg against the U.S. dollar. Traders usually exchange their dollars for the token, before using it to trade for other cryptos.
A high amount of accumulation could mean the market is positioning for more trading action- indicating more volatility in the near-term. A rise in USDT trading could eventually spill over into other tokens.
Santiment also believed the data pointed to more volatility.
Historically, gradually rising active addresses are #bullish. A massive cluster of spikes all at once can be a bit more of a volatility marker.
-Santiment said in a tweet.
But conversely, elevated Tether demand could also mean-
Safe haven seekers are piling into USDT
USDT’s 1:1 peg against the dollar, along with its large reserves, makes it a premier safe haven in the crypto space. The token has seen its volumes surge this year, primarily as the Russia-Ukraine conflict drove up volatility and pushed traders into safe havens.
The token’s accumulation now could also imply that traders are positioning for more headwinds in the market, and as such, piling into safer spaces.
Sentiment is already strained due to the Russia-Ukraine conflict and its economic impact. Traders also have to grapple with increasing inflation and hawkish moves from the Federal Reserve this year. The Bitcoin Fear and Greed index was at fear, and has hovered around that level since February.
All this negative sentiment could also be a driver of Tether demand.
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