Data from on-chain shows that there has been a recent trend in Bitcoin Stablecoin Supply Ratio, which could indicate that crypto may be getting a buy signal.
Bitcoin Stablecoin Supply Ratio RSI 14 Is Near A “Buy” Signal
An analyst explained in a CryptoQuant blog that when the SSR RSI falls below 25 over the past few years, cryptos have seen a buy signal.
The “Stablecoin Supply Ratio” (or SSR in brief) is an indicator that measures the ratio between the market cap of Bitcoin, and that that of all stablecoins.
As their name implies, “stablecoins” are quite stable in their value as they are usually tied to fiat currencies. Investors in crypto markets often shift coins to them when they need to escape volatile markets.
You can then build up an investment portfolio in stablecoins, which can be easily used in cryptos such Bitcoin when the market is right.
The SSR’s value indicates that there is a large stablecoin market capital right now. This means there is an excessive amount of stablecoins at the moment, which could act as buying pressure on cryptos like Bitcoin and therefore can make their prices bearish.
The SSR can also indicate that stablecoin’s market cap may be lower than it is for BTC. Such a trend suggests there isn’t much dry powder that can support other coins and therefore could either be neutral or bearish for their prices.
Below is a chart that illustrates the SSR RSI14 14 trend over the past few years.
Recent decline in the value of this metric is evident. Source: CryptoQuant| Source: CryptoQuant
The “Relative Strength Index” (RSI) records the rate of change in any quantity, which in this case is the Bitcoin SSR. The quant marked the trend zones for the indicator in the graph above.
According to the SSR RSI 14, the SSR RSI 14 values have been above 75 and the cryptocurrency price has seen a sell signal. The metric that reaches values below 25 instead has acted as an buy signal.
Recently, the indicator’s value has been going down and is now near the 25 threshold. However, the buy signal hasn’t formed just quite yet so it remains to be seen whether the metric continues this trend and breaches the 25 level or not.
At the time of writing, Bitcoin’s price floats around $19.7k, down 7% in the past week.
Source: BTCUSD at TradingView| Source: BTCUSD on TradingView
Featured image from Aleksi Räisä on Unsplash.com, charts from TradingView.com, CryptoQuant.com