On-chain analysis: Stock-to-flow and SSR models show that Bitcoin is undervalued
Consider Bitcoin’s on-chain (BTC) indicators, more specifically Stock-to-Flow (STF) and Stablecoin Supply Ratio (SSR).
The STF pattern shows the second highest deviation in recorded history, while the SSR has fallen below the lower Bollinger Band for the fourth time in three years.
The STF deviation is the difference between the BTC price and the STF pattern.
A value higher than one (red line) indicates that BTC is overvalued relative to the pattern. Conversely, a value below one (green line) indicates that it is undervalued.
The lowest value ever measured in November 2010 is 0.3 (black arrow). More recently, July 2017 has a value of 0.36 (black circle).
However, the recent drop in BTC price caused the STF’s deviation to drop to 0.314, its lowest level in about 10 years.
Hence, the price of BTC under the STF model is currently undervalued.
Source: Glass knot
Stablecoin supply ratio for BTC
The SSR is an index that measures Bitcoin’s market capitalization in relation to total stablecoin supply to estimate purchasing power in the stablecoin market. It moves by changing the BTC price or the stablecoin supply.
Low values suggest that stablecoins can buy a significant supply of BTC. For example, a value of 5 means that 20% of the offer can be bought with stablecoins (1/5).
The SSR has hit an all-time low since May 17, when it hit 9.4 for the first time. This is slightly below the previous all-time low of 9.57 that was hit in October 2020.
On June 26, the SSR hit a new all-time low of 5.56.
Another interesting development is that the SSR has fallen below the lower Bollinger Band for the fourth time since October 2018.
The previous three times (circles) marked the bottom of the valley before significant upward movements occurred.
Therefore, if history rhymes, Bitcoin is likely to start another upward move soon.
Source: Glass knot
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.
According to Beincrypto