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27 September 2023
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Stablecoin Metric Indicates Bitcoin’s Price will Surge

The supply ratio of Stablecoin shows a lot more buying power amongst Stablecoin holders for now, with Bitcoin trading at a value of $11,400. Data suggests that at this price, Bitcoin (BTC) is ripe for a fresh surge in price thanks to stablecoin investors who are purchasing cheap coins. Glassnode, the on-chain monitoring resource highlighted the latest readings of its stablecoin supply ratio (SSR) metric. On August 26th, they forecast an upside for the BTC/USD trading pair. The stablecoin supply ratio (SSR) seems to be 3 times stronger than it was in July 2019.

SSR describes the potential buying power of stablecoins as opposed to Bitcoin. For instance, a low price of Bitcoin on exchanges allows stablecoin owners to buy more of the BTC supply. This demand for the cryptocurrency causes an increase in its price, considering its verifiable and predictable supply and high stock-to-flow ratio. When Bitcoin’s price increases, the stablecoins can purchase less of the cryptocurrency’s supply because their price remains the same in whatever fiat currency they are tied to. The ability of entering a Bitcoin position is referred to as the ‘buying power’. Currently, the buying power is high, which means that stablecoin owners can buy a comparatively huge portion of the supply.

Glassnode revealed that as compared to a year ago when Bitcoin had reached the same price levels, the SSR appears to be 3 times stronger. It was noted by the firm in another tweet that Tether (USDT), which is the largest stablecoin, was conspicuously primed for entering such positions. The additional support comes from a rise in the $USDT (ERC20) balance in the last year on exchanges, which indicates that the stablecoins are simply waiting on the sidelines. It was reported earlier that the market cap of Tether had exceeded a landmark in July when it hit $10 billion.

As far as average daily transfer value is concerned, Tether actually managed to beat both PayPal and Bitcoin in this month. A reason for the increase in the supply and consequently, the market capitalization of a stablecoin is to give investors who had bought other assets an opportunity to cash out. Last December, Glassnode had made a blogpost about SSR and they had explained that more stablecoins are needed when there is an increase in Bitcoin’s price. The post indicated that a lack of liquidity that could be seen in the stablecoin supply would just make it more difficult for investors holding profitable positions to exit the market.

The post concluded that to make up for the lack of buying power that would occur once Bitcoin’s price starts to increase, it would be necessary for new fiat money to enter the market. This means that the supply of stablecoin would need to go up. With such indications in the market, it is highly likely that BTC’s price would go up even further and surpass $12,000, as expected. With coronavirus pandemic wreaking its havoc on global economies, more and more people are turning towards the crypto market to hedge against financial uncertainty.

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