Traders sell U to speculate on A shares, is the crypto world really being drained?

Author: Phyrex

Judging whether A-shares or Hong Kong stocks have been draining from the crypto market through data, and whether it will affect the prices and liquidity of the crypto market.

The topic of A-shares draining has been discussed since before October 1st, just in time for a seven-day holiday, and October 8th should be the best point for speculation. Therefore, if there is capital ready to move from the crypto market into A-shares or Hong Kong stocks, this is the best time.

To start with the conclusion, there are indeed signs that capital from the crypto market is leaving. While it cannot be said that all of it has gone to A-shares and Hong Kong stocks, considering the recent surge in trading volume of Chinese concept stocks in the US market, it can be confirmed that some capital has indeed entered markets related to A-shares. However, the volume of this capital does not seem large at present, and its influence on the crypto market is still very low.

At least up to now, there is no clear data proving that capital moving into A-shares will affect the cryptocurrency industry, nor is there clear data indicating that A-shares' draining from the crypto market is destructive. Moreover, there has been no observed trend of large-scale capital moving from the crypto market to A-shares or related markets.

Returning to the data aspect, when discussing capital in the crypto market, the focus is on USDT and USDC. The former is more favored by investors in Asia and Europe, while the latter is more favored by American investors. We will analyze the market capitalization of these two main stablecoins, the net flow of daily exchanges, the stock of exchanges, and the trading volume with #BTC.

First, regarding the market capitalization of the two main stablecoins, see Figure 1, which shows the changes in the market capitalization of USDT and USDC, as well as the price trend of BTC.

From the figure, it can be seen that there has been no significant change in the market capitalization of USDT over the past month. We know that USDT is predominantly used by investors in Asia and Europe, so if Asian investors want to use their funds for A-shares, it should be reflected in the market capitalization of USDT. However, in reality, there has been no significant decline in USDT's market capitalization. Of course, the market capitalization of USDT has not shown significant growth in the past week, which can be seen as a turnover of some funds.

In reality, this portion of capital should not be large. According to previous weekly growth data, the decrease in USDT's market capitalization over the past week is approximately $40 million. Even if this amount is indeed drawn from the crypto market to A-shares, the impact would not be significant.

Next, regarding the market capitalization of USDC, it can be observed that there has been a significant decrease in the last ten days, dropping approximately $85 million from its peak to its lowest point, with a recent rebound of about $13 million in the last four days. The overall decrease is around $72 million. If we calculate the weekly capital increase for USDC, it can be estimated that USDC has reduced its holdings by about $100 million in the last ten days.

This amount may not have directly gone to A-shares or Hong Kong stocks, but it is possible that some of it has been reinvested into US stocks tracking A-share indices, ETFs, or other stocks. This possibility does exist, but just like with USDT, even if this $100 million has moved from the crypto market to A-shares, it is still not a large amount. Moreover, considering the trend of escalating conflict last week, it is very likely that funds are leaving USDC in search of stability, so the actual amount that could go to A-shares may be even less.

Therefore, even at the highest estimate, the amount of capital transferred from the crypto market to A-shares in the last ten days is likely between $150 million and $200 million, and its impact on crypto prices is negligible. The reason for this expectation can be seen in Figure 2.

Figure 2 clearly describes the data of USDT and USDC entering exchanges over the past two weeks. The most intuitive observation is that the amount of funds entering and exiting exchanges for both USDT and USDC has not fallen below or significantly exceeded previous levels. This indicates that even if there is capital leaving the crypto market and moving to A-shares, it is still insufficient to impact the normal inflow of funds into exchanges.

In simpler terms, even if there is so-called draining from the crypto market to A-shares, the impact on cryptocurrencies like BTC and ETH is very small.

Returning to Figure 1, there is one very important additional data point: the price changes of BTC are correlated with the changes in the market capitalization of USDC, and the correlation is very high. It can be said that the changes in USDC's market capitalization and BTC's price are mutually positively correlated. When USDC's market capitalization is increasing, BTC's price tends to rise, and when BTC's price falls, it corresponds to a decrease in USDC's market capitalization.

Of course, this data is not a 100% judgment method, but remember that we have been emphasizing that USDC is more used by American investors, and currently, the main investors in BTC and ETH are also Americans. Thus, USDC serves as a barometer of American investor sentiment.

Next, let’s look at Figure 3.

Figure 3 shows that the stock of USDT and USDC in exchanges has not undergone any substantial changes. This aligns with the data I shared three weeks ago in the tweet "Using stablecoin data to judge the current investor trend: buying or selling?" Therefore, I can conclude that even the USDT and USDC present in exchanges show no significant signs of transferring to A-shares, and even if there are some, they are insufficient to affect the purchasing power of the crypto market itself.

Finally, we need to examine the changes in trading volume for the two major BTC exchanges, Binance and Coinbase. Let’s look at Figure 4.

In Figure 4, the upper part shows the trading volume of BTCUSDT on Binance, while the lower part shows the trading volume of BTCUSD (USDC). It can be seen that Binance's trading volume before last Thursday was not significantly different from the past, with a slight decrease on Thursday and Friday, but it is not severe. In contrast, Coinbase's data appears much more normal; although there was a slight decrease on Friday, the drop was lower. Combined with the BTC turnover rate data released last Friday night, it is evident that the overall turnover has decreased.

Considering the macro sentiment at that time, it seems that part of the reason is that the favorable non-farm payroll data has led some investors to remain cautious and not actively participate in the turnover. In fact, the spot ETF data for BTC and ETH is similar. Therefore, from the comparison of trading volumes, even if some USDT and USDC have moved from the crypto market to A-shares, the volume of these transfers is not sufficient to impact the liquidity of the crypto market itself.

In conclusion, there is indeed some capital, especially USDC, that has clearly moved out of the crypto market, possibly into markets related to A-shares. The total inflow should be less than $200 million, and this capital has not had a significant impact on the prices of BTC and ETH, nor is it sufficient to affect the overall liquidity of the crypto market at present.

At least up to now, there is no clear data proving that capital moving into A-shares will affect the cryptocurrency industry, nor is there clear data indicating that A-shares' draining from the crypto market is destructive. Furthermore, there has been no observed trend of large-scale capital moving from the crypto market to A-shares or related markets.