Stablecoin Supply Ratio vs BTC is at the 5-month low

By SirK133 | CryptoCat | 28 Apr 2021


Today’s chart that the cat dragged in is the 7-day moving average of Stablecoin Supply Ratio to BTC (SSR) which has reached its lowest point in 5 months. Five months ago, those were the times when 1BTC could still be bought below 20k USD.

That's a lot of USDT

Chart by Glassnode.com

What is SSR?

The Stablecoin Supply Ratio is the ratio between Bitcoin supply and the supply of stablecoins denoted in BTC, or in simple terms: Bitcoin Market cap / Stablecoin Market cap. Glassnode uses all the top stablecoins for calculating the supply: USDT, TUSD, USDC, PAX, GUSD, DAI, SAI, and BUSD. Current value of SSR is 13.537. So for 1$ in BTC there are over 13.5$ of stablecoins that can potentially buy it.

What does it mean

When the SSR is low, the current stablecoin supply has more "buying power" to purchase BTC. In theory by Glassnode:

“If the price of Bitcoin is low, that supply is able to buy a larger portion of the circulating BTC supply and therefore, push the price up — buying power is high. As the price of BTC goes up, that supply of stablecoins is able to purchase less and less of the BTC on the market which reduces its ability to move the price upwards — buying power is low. At the same time, the resulting lack of liquidity in the stablecoin supply makes it harder for investors in profitable positions to exit.”

But the current price of BTC is not low – not in such timeframe. This means that huge amounts of stablecoins have been minted and are now standing by, possibly to inflate the prices of many coins. Since BTC and altcoins are mainly traded against stablecoins this for me looks a bit like a equivalent of recent fiat money printing entering the system – and in one thing all experts (and cats) agreed – sooner or later it will lead to inflation.

While the SSR is by no means a complete market-wide indicator and does not take into account many important factors, it is difficult to interpret the current levels as anything other than a bullish signal.

UPDATE:

The trend continues - SSR value dropped lower, to 13.431 (29.04.2021).

This is not a financial advice – I’m no financial adviser, nor is this legal advice – although I’m a lawyer. This is no advice at all, seriously, don’t take advice from random cats – the Internet is full of them! DYOR!

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SirK133
SirK133

Lawyer, analyst, crypto enthusiast, gamer, poet. I am interested in everything that makes up our world and how it is related.


CryptoCat
CryptoCat

My cat so often stomps the keyboard while I do my crypto research, I might as well make him a co-host here.

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