Bitcoin on chain analysis: stablecoins show enormous purchasing power

In this article, Bitcoin Magazine looks at Bitcoin’s on-chain metrics, such as Stablecoin Supply Ratio (SSR) and Tether (USDT) balances on exchanges, to determine the purchasing power of current stablecoins on the total supply of Bitcoin (BTC).

In addition, we analyze the stock-to-flow (STF) model to determine if Bitcoin is undervalued.

SSR

SSR measures the relationship between stablecoin and BTC supply. It can be moved in two ways:

• Change in BTC price
• Change in the stablecoin offer

When the SSR is low, it means that a significant percentage of the total BTC supply can be bought with stablecoins. An SSR value of 10 means that 10% of the entire offer can be bought with stablecoins.

The SSR fell to an all-time low of 6 on June 8th. According to the above calculation, this meant that at that time 16.66% (1/6) of the BTC supply could be bought with stablecoins.

The low is being made below the lower band of the Bollinger Band (BB) indicator for the fourth time. The previous three (black circles) saw clear upward movements. Similarly, an uptrend occurred after June 8th, suggesting that a fall below the lower band of the BB indicator usually signals a bottom.

While the SSR is currently in the middle of the BB indicator, it remains at 7.5, a relatively low value for most of its history.

The source: Glass knot

USDT balance

The tether (USDT) balance on the exchanges hit an all-time high in June 2021. After falling, it hit a lower high in early September.

There was a sharp decline between September 7th and 15th. On September 7th, the BTC price plummeted from a high of $ 52,920 to as low as $ 42,843. It hovered below $ 45,000 through September 15 before rising as mentioned in the previous section.

Therefore, the decline in USDT balances on the exchanges could be the result of market participants shopping in the wake of the decline.

The source: Glass knot

Bitcoin stock-to-flow model

The STF deviation shows the difference between the BTC price and the price predicted by the STF model.

The value of the indicator of one indicates that the model correctly predicts the price of BTC.

Values ​​above one (red) indicate an overvaluation, while values ​​below one (green) indicate an undervaluation.

The index has fallen since February 20th, bringing it to a July 20th low of 0.27 (arrow), its lowest level on record. At that point, BTC was trading at $ 29,783.

Although the indicator has since moved up, it remains at 0.438. This means that the current BTC price is only 43.8% of what the STF model predicts. Therefore, it is still undervalued compared to the model.

Previously, values ​​close to 0.40 were reached in March 2017 and July 2017 as well as in December 2020, which marked a local low for Bitcoin.

The source: Glass knot

You can see the Bitcoin price here.

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Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.

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