An quant explained to us how data about the stablecoin stock ratio (SSR), can be used for Bitcoin buy and sell signals.
Stablecoin Supply Ratio may be able to predict Bitcoin buy and sell signals
In a CryptoQuant article, an analyst explained that stablecoin supply may be used to help identify BTC buy and sell signals.
The “stablecoin supply ratio” (or SSR in short) is an indicator that measures the ratio between the market cap of Bitcoin and that of all stablecoins.
This measure shows how stablecoins’ supply compares with BTC. These fiat-tied coins are often used by investors to avoid volatile markets. They can also hold onto the coin until it reaches a viable entry point.
In this way, stablecoins are potential dry powder to Bitcoin. If the SSR value is high it indicates that the current supply of BTC will be much greater than the stablecoins. This could mean that the potential buyer power in the market is less and this may be bearish on the crypto’s price.
Low ratios, on the other hand mean that stablecoins have a fair amount of purchasing power at the moment. This can have a positive effect on the BTC’s value.
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Below is a chart showing how stablecoins have changed over the past two years.
Source: CryptoQuant| Source: CryptoQuant
You can see that quant highlighted the areas of interest in the SSR RSI chart (a modified version)
According to the analyst, Bitcoin is a solid buying point if its value falls below 25.
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Values above 70 indicate a sell signal. A few months ago, the metric indicated a buy sign and is now making steady progress.
If the past trend pattern is any indication, crypto prices could surge now. The indicator will indicate a sell signal close to the top.
BTC price
At the time of writing, Bitcoin’s price floats around $43k, up 5% in the last seven days. The crypto gained 15% over the last month.
The chart below shows how the currency’s price has changed over the course of five days.
Source: BTCUSD on TradingView| Source: BTCUSD on TradingView
Unsplash.com's featured image. Charts by TradingView.com. CryptoQuant.com chart.