On-chain data shows that stable Bitcoin supply is now showing a green signal that has proven profitable for the cryptocurrency multiple times in the past two years.
Bitcoin Stablecoin Supply Ratio Shock Momentum Forms ‘Buy’ Signal
As pointed out by an analyst at CryptoQuant MailOut of the previous 11 buy signals, 10 ended up being profitable for cryptocurrency.
The “Stable Coin Supply Ratio“(or SSR for short) is an indicator that measures the ratio between the market capitalization of Bitcoin and the market capitalization of all stablecoins.
Generally, whenever investors want to avoid the volatility associated with cryptocurrencies like BTC, they convert their currencies into stablecoins. Once they feel the prices are right to get back in the markets again, they buy it again. As such, the total supply of stablecoins can be viewed as potential buying pressure for other cryptocurrencies.
When the SSR is high, it means that the supply of BTC is higher compared to the ceiling of the stablecoin, and therefore there is low buying pressure in the market at the moment.
On the other hand, low index values indicate that there is a high potential dry powder on the market at the moment. For this reason, this Bitcoin price can be bullish.
Now, there is a metric called Bitcoin SSR “Shock Momentum,” which tracks the rate of change in its value. Here is a graph showing its trend over the past two years:
Looks like the value of the metric has been low in recent days | Source: CryptoQuant
As you can see in the chart above, the quantity from the post identified trend points related to the Bitcoin SSR shock momentum.
It appears that whenever this metric makes a lower low below the green dotted level, the cryptocurrency price notices a buy signal.
During the past two years, there have been eleven instances of this pattern occurring, of which only one has been shown to be a false signal.
Recently, the indicator showed this composition again. If the past trend is anything to go by, this could be bullish for Bitcoin.
At the time of writing this report, Bitcoin price It is floating around $20.9K, up 4% in the past week. Over the past month, the cryptocurrency has lost 12% of its value.
The chart below shows the trend in BTC price 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