Investors are always analyzing market signals to decide what decision to make. This is especially true in the world of cryptocurrencies, where volatility is latent. In this case, the indicator known as the stablecoin supply ratio oscillator is signaling a new capital inflow into Bitcoin.
The stablecoin supply ratio oscillator created by analyst Willy Woo and followed by Glassnode has risen from a 12-month low of -2.6 to -1.9 in the last four weeks. The recovery indicates that capital has been flowing from stablecoins to Bitcoin, Glassnode tweeted.
What does this indicator consist of? What is the relationship between stablecoins and Bitcoin?
The stablecoin supply ratio (SSR) is the ratio of the Bitcoin supply and the stablecoin supply stated in BTC. “When the ratio is low, the purchasing power of Bitcoin is high, since the same amount of USD can buy relatively more BTC. On the contrary, a high ratio means that fiat has weak purchasing power, ”explained Glassnode.
Stablecoins are cryptocurrencies with a value pegged to an external reference such as the US dollar. Hence, investors turn to them when looking to hedge against BTC dips. Its total market capitalization increased tenfold from year to year to more than $ 100 billion, according to Messari.
The stablecoin supply ratio oscillator helps traders identify extreme readings in the SSR and any impending trend reversals. However, the indicator does not consider trading based on fiat currency or bitcoin derivatives and is not a perfect indicator.
Bitcoin is currently trading near $ 31,700, which is a 4.49% drop on the day. Since May, Bitcoin has fallen sharply and has mostly been restricted to the range of US $ 30K to US $ 40K since then, barring the temporary drop to US $ 29K earlier this week. Therefore, if the signals from this indicator are true, Bitcoin has a way to go to break this resistance.
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