On-chain data shows that the bitcoin stablecoin supply ratio is now showing a green signal that has proved profitable for the crypto several times over the past two years.
Bitcoin Stablecoin Supply Ratio Shock Momentum Forms “Buy” Signal
As pointed out by an analyst in a Cryptoquant post, 10 of the last 11 such buy signals were profitable for crypto.
The “stable money supply ratio” (or SSR for short) is an indicator that measures the ratio between the market cap of bitcoin and all stablecoins.
Generally, whenever investors want to avoid the volatility associated with cryptos like BTC, they shift their coins to stablecoins. Once they feel the prices are right to re-enter the markets again, they buy back into them. Therefore, the total stablecoin supply can be seen as potential buying pressure for other cryptos.
When the value of the SSR is high, it means that there is more BTC supply than the stablecoin cap, and thus there is less buying pressure in the market at present.
On the other hand, lower values of the indicator suggest that there is a high potential dry powder in the market right now. Because of this, such a trend could be bullish for the price of bitcoin.
Now, the Bitcoin SSR has a metric called “shock speed”, which tracks the rate of change in its value. Here’s a chart that shows trends for the past few years:
Looks like the value of the metric has been low in recent days | Source: CryptoQuant
As you can see in the graph above, the posted volume marked relevant points of the trend of the Bitcoin SSR shock momentum.
It looks like the crypto price has seen a buy signal whenever this metric has broken below the green dotted level.
During the last two years, eleven cases of this pattern have been reported, out of which only one has turned out to be false.
Recently, the indicator has once again shown this formation. If the previous trend is anything to go by, it could be bullish for Bitcoin.
At the time of writing, bitcoin is priced around $20.9k, up 4% over the past week. In the past month, the crypto has lost 12% in value.
The chart below shows the BTC price trend over the past five days.
The value of the crypto seems to have spiked up over the past day | Source: BTCUSD on TradingView
Featured image from Quaritsch Photography on Unsplash.com, charts from TradingView.com, CryptoQuant.com