The dominance of USDT can provide valuable insights into the overall sentiment of the crypto market. Being the largest stablecoin, the movements and transactions of USDT often mirror the liquidity conditions in the market.
Typically, USDT dominance is expected to have an inverse correlation with Bitcoin [BTC] and other alternative cryptocurrencies. Higher dominance of USDT usually coincides with capital outflows from other digital assets.
For instance, despite the generally positive market performance in September, USDT.D encountered a notable retracement during that period.
An analysis of patterns in USDT dominance can offer a glimpse into the potential future market trends. On the 19th of September, USDT.D breached its 3-month ascending support line, suggesting a shift in momentum.
Recent trends indicate that USDT dominance has been forming lower highs, indicating a waning momentum in the market.
Although there were signs of a resurgence in momentum earlier this month, USDT dominance slightly receded in the past few days, remaining marginally above the 50% RSI level, which suggests a state of market indecision.
A drop below the 50% RSI level could confirm a further decline, potentially leading to a shift in liquidity towards Bitcoin and other altcoins.
Conversely, a rebound from the current level could prolong the decline, contingent upon market sentiment and investor behavior.
Insights from USDT Dominance and Transaction Flows
Between the 3rd and 6th of October, there was a notable decrease in USDT address activity.
However, the activity rebounded with the number of active addresses rising from 16,360 to over 18,400 in the past three days.
The number of addresses with zero balances increased from 19,860 to 22,530 during the same period, indicating a substantial movement of funds from USDT to alternative cryptocurrencies, aligning with the decline in USDT dominance.
Despite the observed trends, the flows of large holders portrayed a somewhat balanced scenario in terms of directional impact.
These significant market participants, often referred to as whales, play a pivotal role in influencing liquidity and shaping market trends.
Notably, the inflows and outflows for USDT among large holders reached equilibrium in the past 24 hours, with inflows peaking at 2.82 billion USDT and outflows at 2.83 billion USDT.
Based on these insights, it appears that there was a level of uncertainty regarding the market direction, reflecting the prevailing neutral sentiment among market participants.