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- Data from Santiments shows that whales are accumulating large amounts of stablecoins which could signal an entry into Bitcoin and Ethereum soon.
- Whales have been encouraged by the continued support of stablecoins by governments around the world.
The crypto market is witnessing a sustained wave of stablecoin accumulation even as the general bear market continues. According to the behavior analysis platform Santiment, whales with already sizable accounts are adding more stablecoins to their portfolios.
Santiment reports that USDC and USDT are the preferred stablecoins for these large account holders. According to an image posted on Twitter, USD Coin holders with at least $100k and up to $10m have increased their holdings by 12.1 percent since early August. The image also shows that Tether holders with $100k to $10m have added 8.6 percent more USDT.
🐳 #Stablecoin accumulation is being shown by #crypto whales over the past three months, and there is significantly more buying power by large traders compared to the June bottom. $USDT and $USDC being accumulated has historically foreshadowed price rises. https://t.co/MxYGsi7tjY pic.twitter.com/jzh8GIsVNL
— Santiment (@santimentfeed) November 8, 2022
Santiment did not suggest a reason for the renewed interest in accumulating stablecoins or explain why the whales seem to have more buying power. Regardless, the accumulation may signal more faith in stablecoins over fluctuating assets, especially since the market is currently unstable. The buying spree could also signal more market volatility in the near future.
Both stablecoins are the two largest in the market, with Tether’s USDT as the third largest and Circle’s USDC as the fifth. Months ago, USDC seemed more intent on closing the gap as it rose to become the market’s fourth-largest asset by market cap. Since the year began, Circle has been pumping more USDC into the market to meet a general and increasing demand for liquidity.
Stablecoin regulation could augur well for whales
Stablecoins may be better poised for favorable policies from the government, a move that could keep whales acquiring more. Recently, Federal Reserve Vice Chair for Supervision of the Board of Governors Michael Barr seemed to support these assets. Speaking at the DC Fintech Week in October, Barr believes there is quite the potential for stablecoins to be used as money. He also specified that he doesn’t share the same sentiments for other assets like Bitcoin.
As optimistic as he seemed, the Fed Vice Chair expressed concern over risks associated with stablecoin use. According to him, banks may be unable to properly ensure lawful usage. Barr said:
For instance, with some models that are being explored, the bank may not be able to track who is holding its tokenized liability or whether its token is being used in risky or illegal activities.
Barr admitted that there might be options for ensuring customers don’t disregard stipulated laws. However, he still worries that enforcing the options might be tricky for legacy banks.
While there is work underway on technical solutions for managing these risks, it remains an open question whether banks can engage in such arrangements in a manner consistent with safe and sound banking and in compliance with relevant law.
Barr concluded by advising interested banks to begin early consultations with regulators to discuss these options and ensure that they are legally acceptable.
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