The stablecoin supply ratio (SSR) is a key market indicator that has been steadily rising year-to-date, indicating a decline in stablecoin purchasing power.
The SSR is a metric that provides insight into the supply and demand dynamics between Bitcoin (BTC) and the US dollar. When calculating the SSR, the total supply of stablecoins is divided by the market capitalization of Bitcoin.
When the SSR is low, it indicates that the purchasing power of stablecoins is high. This means that for every dollar represented by stablecoins, a larger chunk of Bitcoin’s market cap is available for purchase.
On the other hand, a high SSR indicates that the purchasing power of stablecoins is low. In this scenario, each dollar represented by stablecoins can buy a smaller portion of Bitcoin’s market cap.
Graph showing the SSR from 2018 to 2023 (Source: Glassnode)
The SSR is an important indicator as it provides a snapshot of the potential buying power of stablecoins in the bitcoin market. It helps traders and investors understand whether the market is currently dominated by those holding dollar-pegged stablecoins or Bitcoin holders.
Year-to-date, the SSR has risen from 2.36 to 4.65. This sharp increase indicates a significant drop in the purchasing power of stablecoins. This trend happened in tandem with the rising price of bitcoin.
Chart showing the SSR YTD (Source: Glassnode)
Chart showing the SSR YTD (Source: Glassnode)Given the recent surge in SSR, it’s worth noting that the supply and importance of certain stablecoins has increased significantly. As detailed in the previous CryptoSlate analysis, Tether (USDT) and TrueUSD (TUSD) outstanding balances have hit record highs this year.
At the end of July, Tether’s supply hit an all-time high of $83.89 billion, while TrueUSD’s supply peaked at $3.04 billion. These two stablecoins are particularly important as they make up the majority of crypto-stablecoin trading pairs on centralized exchanges.
Chart showing circulating stocks of USDT and TUSD YTD (Source: Glassnode)
The implications of this rising SSR are multifaceted and require careful analysis. On the one hand, the growing supply of stablecoins indicates strong demand for these assets, which are often used as a safe haven during periods of market volatility.
On the other hand, the rising SSR suggests that the purchasing power of stablecoins relative to Bitcoin is decreasing. This could potentially lead to a drop in demand for bitcoin, which in turn could put downward pressure on the price of bitcoin.
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