On-chain data shows that the recent trend in the Bitcoin stablecoin supply ratio could indicate that the crypto could see a buy signal soon.
Bitcoin stablecoin supply ratio RSI 14 is close to a “buy” signal
As one analyst explained in a CryptoQuant post, the cryptocurrency has observed a buy signal whenever the SSR RSI has dipped below a level of 25 for the past several years.
The “Stablecoin Supply Ratio” (SSR for short) is an indicator that measures the ratio between the market capitalization of Bitcoin and that of all stablecoins.
As the name suggests, “stablecoins” are fairly stable in value as they are typically pegged to fiat currencies. Because of this, investors in the crypto market move their coins during times when they want to escape the volatile markets.
This can build a reserve in the form of stablecoins that can easily be deployed into cryptos like bitcoin whenever investors think prices are right to re-enter.
When the value of the SSR is low, it means that the stablecoin market cap is currently high. This suggests that there is currently a large amount of stablecoins piling up which are acting as buying pressure for cryptos like bitcoin and therefore may be bearish for their prices.
On the other hand, a high SSR can mean that the stablecoin market cap is currently lower compared to the BTC market cap. Such a trend suggests that there isn’t much dry powder that can support other coins and therefore could be either neutral or bearish for their prices.
Now here is a chart showing the trend of the SSR RSI 14 over the past few years:
The value of the metric seems to have decreased recently | Source: CryptoQuant
The Relative Strength Index (RSI) captures the rate of change of any quantity, which in this case is the Bitcoin SSR. In the chart above, the quant has marked the relevant trend zones for this indicator.
It looks like the price of the crypto has observed a sell signal whenever the SSR RSI has reached 14 levels above 75. While the metric reaching values below 25 acted as a buy signal instead.
Recently, the value of the indicator has been falling and it is now close to the 25 line. However, the buy-signal has not quite formed yet, so it remains to be seen whether the metric will continue this trend and break the 25-level or not.
BTC price
At the time of writing, Bitcoin’s price is hovering around $19.7k, down 7% over the past week.
It looks like the value of the crypto has gone down | Source: BTCUSD on TradingView Featured image by Aleksi Räisä on Unsplash.com, charts by TradingView.com, CryptoQuant.com
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