When supply jumps 3.5% in a month, the price of Bitcoin will find a stable coin
Bitcoin (BTC) is benefiting from the stablecoin's increasing “purchasing power” as their supply trends higher.
Data from on-chain analytics firm Glassnode shows a continued decline in the Stable Coin Supply Ratio (SSR) oscillator.
The key stablecoin metric has dropped 80% from its record high
Bitcoin hit a two-year high this month, due in October 2023 — and stablecoin data says that's no coincidence.
The SSR swing tracks the ratio between Bitcoin's market cap and the combined value of all known stablecoins. As Glassnode explains, the tool “serves as a proxy for the supply/demand mechanics between BTC and USD.”
When SSR prices are low, stablecoins have more purchasing power to purchase BTC supply.
After reaching new all-time highs in October, the SSR volatility has decreased significantly – going from 4.13 on October 25 to just 0.74 on January 22.
Research and data analyst at Crypto Insights company CryptoSlate, James Van Straten, analyzed changes in the entire stablecoin market and predicted supply growth starting in the fourth quarter of 2023. This year, the trend continues.
“As we saw last week, the rotation of stablecoins moving into Bitcoin, sent BTC over 42k,” he told X subscribers on January 31.
“Stablecoin supply is now above a low of 10B, and is up 3.5% over the past 30 days.”
From May 2022 to October 2023, the stable coin supply was in reverse retreat.
Institutions add to BTC volumes on chain
As Cointelegraph continues to report, Bitcoin is currently experiencing its own changes in supply dynamics.
RELATED: Bitcoin traders dismiss BTC price at 2-week high amid fresh liquidity squeeze
These opened the door to institutional capital flows in the United States for the first time thanks to the newly launched Bitcoin Exchange Traded Funds (ETFs).
Additionally, a major “rebalancing” is underway from one ETF, the newly rebranded Grayscale Bitcoin Trust (GBTC).
In the latest edition of its weekly newsletter, “The Week On-Chain,” Glassnode admitted that flows on-chain are still in flux three weeks after the ETF's launch.
“After several years of trading at a severe NAV discount (with a very high 2% fee), the conversion to a spot ETF triggered a significant re-balancing event,” the researchers wrote.
“After converting ~115.6k BTC, they were withdrawn from the GBTC ETF, creating significant market headwinds.”
Even if these redemptions continue, forecasts are for volumes to decline rapidly in the near term, reducing sell-side pressure.
Glassnode adds that institutional flows are becoming increasingly widespread on-chain.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
