Journalist
Posted:
- U.S. CPI Data showed that inflation was higher than predicted.
- USDC netflow surged to 698 million before CPI data and surged to 1.09 billion within a day.
With the crypto’s continued growth, it has become more interconnected with the global economy.
More so, the crypto markets currently have a high correlation with the U.S. market, and any news or development has positive or negative effects.
Source: CryptoQuant
As investors waited for inflation data, they turned to stablecoins, especially USDC. As such, USDC inflow to exchanges spiked with the netflow hitting 698 million before the Consumer Price Index (CPI) data release, according to CryptoQuant.
By the end of the day and the release of CPI data, USDC had surged to 1.09 billion recording a positive value for the first time over the past week.
Source: CryptoQuant
When the netflow is positive, it suggests increased stablecoin liquidity on exchanges.
Why USDC netflow matters
Firstly, the rising USDC netflow is significant for several reasons. Increased liquidity inflow means traders are preparing to buy crypto assets.
Thus, stablecoins act as dry powder for traders looking to enter positions.
Source: IntoTheBlock
Secondly, a surge in USDC inflow implies that institutions or whales are getting ready to enter the market and accumulate Bitcoin or other promising assets.
This whale accumulation of crypto assets using USDC is evidenced by rising Large Holders Netflow and Exchange Netflow Ratio, spiking from 3.4% to 50% in four days.
Such inflow implies that whales and institutions are active in the market to accumulate crypto assets.
U.S. CPI remains higher than the market expected
While crypto investors were anticipating favorable CPI data as evidenced by rising USDC demand, it turned out differently.
Source: Investing.com
Inflation in the U.S., as tracked by CPI, surged by 3.0% in January compared to the same month in 2024. This surpassed December’s increase, according to data from the U.S. Bureau of Labor Statistics.
The increase was higher than most estimates, with CPI rising by 0.5% every month, compared to December’s 0.4% rise. Core CPI rose by 3.3% from a year ago, above the 3.1% predicted by many analysts.
What it means for crypto
The release of CPI data had an immediate impact on crypto markets. Bitcoin dropped to $94k, then rebounded to $98,151, and retraced to $96k. This fluctuation means that CPI data had little positive impact as the crypto continued to trade sideways.
Additionally, the entire crypto market behaved similarly to BTC. The market cap surged to $3.25 trillion, then declined to $3.20 trillion.
While investors were optimistic as USDC inflow surged, poor CPI data shifted sentiments suddenly from bullish to bearish.
