Analysis

On-Chain Analysis: Stablecoin Supply Ratio (SSR) Hits New All-Time Low, Time to Buy BTC?

In this article, CoinCu will look at Bitcoin (BTC) on-chain metrics, more specifically stablecoin supply ratio (SSR) and Tether (USDT) supply on exchanges to determine if it’s time to to buy BTC?

What is SSR?

The SSR is an index that measures Bitcoin’s market capitalization relative to the total stablecoin supply to estimate purchasing power in the stablecoin market. Since the BTC supply and stablecoin price are fixed, the indicator changes whenever the BTC price or stablecoin supply changes.

Low readings suggest stablecoins can buy a significant supply of BTC. For example, a value of 10 indicates that 10% of the supply can be bought with stablecoins (1/10), while a value of 5 indicates that 20% (1/5) of the supply can be bought with stablecoins.

Buy signal?

A good buy signal is given when the SSR falls below the lower band of the Bollinger Band indicator (black circle). This means that he has deviated downwards compared to his normal movement.

So far he has deviated four times. Each of them was followed by a very strong move higher.

On January 19, the SSR hit a new all-time low of 5.26. However, it has not broken below the lower band of the Bollinger Band indicator yet, although it is very close to it.

A buy signal has therefore not yet been given.

The source: glass node

USDT billion in balances

The circulating supply of USDT (black) has been increasing steadily since September 2020. The surge has continued for the past three months, and combined with BTC’s decline, it has catalyzed the bullish SSR decline.

An interesting observation is that USDT balances on exchanges are decreasing (red). This usually means that investors are still optimistic about the future prospects of the market and are removing their tokens from the exchange address.

In addition, the supply of USDT tied in smart contracts (in green) is increasing. This is in stark contrast to December when the opposite happens.

The source: glass node

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Annie

Championing positive change through finance, I've dedicated over eight years to sustainability and environmental journalism. My passion lies in uncovering companies that make a real difference in the world and guiding investors towards them. My expertise lies in navigating the world of sustainable investing, analyzing ESG (Environmental, Social, and Governance) criteria, and exploring the exciting field of impact investing. "Invest in a better future," I often say. That's the driving force behind my work at Coincu – to empower readers with knowledge and insights to make investment decisions that create a positive impact.