According to a report by Glassnode, Bitcoin’s falling stablecoin supply ratio (SSR) indicates increased supply of newly minted coins on exchanges. This increase in supply, in turn, means that exchanges are currently “highly liquid and ready to buy up assets like Bitcoin”.
Stable supply of coins
As explained in the report, the SSR is a ratio of the total value of all bitcoins to stable coins. This metric “goes down when (either) the price of BTC is low or when more stable coins go into circulation.”
However, since BTC prices are already high, the increased supply of stable coins remains the only possible reason for the low rate. Messari data already shows that the market cap for stablecoin as of February 1 is currently around $ 39 billion. Of this, the USDT stablecoin accounts for $ 28 billion or around 71% of the market share.
However, as the Glassnode report notes, it is the USDC stablecoin that is seeing “massive exchange rate inflows” in 2021. Commenting on the likely impact of such inflows, the report’s authors say:
The number of USDC on exchanges rose over 112% from $ 431 million to over $ 915 million in January alone. That equates to nearly $ 1 billion in purchasing power from USDC alone, ready to invest in assets like Bitcoin.
The authors also state that “this high number should increase investor confidence in a quick buy from dips, making it a bullish signal.”
Profit taking completed
In the meantime, onchain analyst Willy Woo has also made his own bullish comment. According to Woo’s analysis, profit taking is now complete and “the market has completed a complete elimination of overheating”.
Using the Spend Output Profit Ratio (SOPR) chart to back up his claim, Woo suggests that the crypto market may have passed the “bearish phase”. He explains that “Coins that move between investors no longer bring profit when SOPR touches the 1.0 line.”
To back up this point, Woo explains:
In order to lower the SOPR, investors would have to be willing to sell at a loss. To make this possible we would have to enter a bearish period, but this is very unlikely as we are tied to the $ 29,000 floor price.
At the time of writing, BTC was trading above $ 35,700 on Tuesday, up 5%.
Do you agree that the lower SSR rate indicates high liquidity on the exchanges? You can share your views in the comments section below.
Photo credits: Shutterstock, Pixabay, Wiki Commons, Glassnode,
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