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- Bitcoin dip is being purchased by investors using stablecoins
- The SSR tool shows a surge indicating that bargain hunters are buying the BTC dip
- SSR helps traders to identify extreme readings on the impending trend change
- Although many considered SSR as inaccurate, still, previously the indicator has proved its reliability
Bitcoin has seen heavy turbulence in its price since mid-May 2021. After the price dips, recently, it was observed that the stablecoin supply ratio oscillator has surged. The indicator was created by analyst Willy Woo and tracked by Glassnode, a blockchain analysis firm. The indicator has marked major price bottoms rising from a 12-month low of -2.6 to -1.9 over the recent weeks. According to experts in the cryptosphere, the indicator points to a renewed flow of capital into the flagship cryptocurrency.
Bitcoin dip being purchased using stablecoins
On Thursday, Glassnode tweeted regarding the recovery in the stablecoin supply ratio oscillator. The blockchain analysis firm claimed that the data indicates an increment in the capital flow from stablecoins to Bitcoin. Indeed, the bargain hunters seem to have employed their fiat-pegged cryptocurrencies to purchase the dip in BTC and the broader crypto market.
Being proxies to fiat currencies issued by the governments, stablecoins are widely being used to fund purchases in the crypto market. Notably, over the years, the total market capitalization of such crypto-tokens has surged by more than ten times. According to Messari, currently, the total market cap of stablecoins is more than $100 billion.
How does the stablecoin supply ratio help traders?
The stablecoin supply ratio or the SSR shows the stable token’s supply ratio denoted in Bitcoin. According to Glassnode, when the SSR is low, the buying power for BTC is high. Notably, the same count of the US dollar can acquire more Bitcoins. In contrast, a high ratio means the fiat has weak purchase power.
Ultimately, SSR helps traders to identify extreme readings on the impending trend change. However, the tool does not help to consider the fiat-based trades or BTC derivatives. Moreover, many have deemed it not to be a perfect indicator.
Is SSR a reliable indicator?
Although many considered SSR as inaccurate, still, previously the indicator has proved its reliability. BTC’s bull markets, including the Q4 of the last year, have kicked off with a below -2 reading on the SSR tool. Notably, the recent recovery could be a signal of an impending change of fortunes for the Bitcoin and altcoins market.
USDT performance over the recent weeks
In mid-May, the entire crypto market faced heavy turbulence along with Bitcoin, which lost more than 50% of its value from the last ATH. However, since then, we have observed that Tether (USDT), the largest stablecoin’s value, has continued to surge in terms of market capitalization. Over the previous four weeks, the market cap of USDT has crossed $64 billion from $59 billion.
