According to a report by Glassnode, bitcoinâ€™s declining stablecoin supply ratio (SSR) indicates an increased supply of newly minted coins on exchanges. In turn, this increase in supply means exchanges are currently â€œhighly liquid and ready to buy up assets such as bitcoin.â€
Stablecoin Supply Growth
As explained in the report, the SSR is a ratio of the total value of all bitcoins versus stablecoins. This metric â€œdecreases when (either) the price of BTC is low or when more stablecoins are entering circulation.â€
However, with BTC prices are already high, this leaves the increased stablecoin supply as the only possible reason behind the low ratio. Already, Messari data shows that the total stablecoin market capitalization currently stands at approximately $39 billion as of February 1. From this total, the USDT stablecoin accounts for $28 billion or approximately 71% share of the market.
However, as the Glassnode report notes, it is the USDC stablecoin that is seeing â€œmassive exchange inflows in 2021.â€ In their commentary on the likely impact of such inflows, the reportâ€™s authors say:
The authors also explain that â€œthis high figure should increase investorsâ€™ confidence in any dips being quickly bought up, making it a bullish signal.â€
Profit Taking Complete
Meanwhile, also weighing in with their own bullish commentary is the onchain analyst, Willy Woo. According to Wooâ€™s analysis, profit-taking is now complete, and â€œthe market has completed a full purge of overheatedness.â€
Woo, who uses the spent output profit ratio (SOPR) chart to support his assertion, suggests the crypto market may have gone past the â€œbearish phase.â€ He explains that when â€œSOPR touches the 1.0 line, coins moving between investors no longer carry profit.â€
To bolster this point, Woo explains:
At the time of writing, BTC was trading above $35,700 handle up 5% on Tuesday.
Do you agree that the lower SSR ratio points to high liquidity on exchanges? You can share your views in the comments section below.
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