Analyzing Stablecoin's and Bitcoin's Relationship | Credit: Hameem Sarwar
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Key Takeaways
The aggregate stablecoin supply is approaching its all-time high.
The SSR indicator and oscillator have both reached historic lows.
Is the Bitcoin (BTC) price on the cusp of beginning a major movement?
Since March, the Bitcoin price has trended downward, and its market capitalization has fallen similarly. However, contrary to what usually happens, the stablecoin supply has grown during this time.
Let’s analyze the stablecoin supply and its growth, focusing on previous historical levels to determine its importance for the current Bitcoin market cycle.
Stablecoin Supply
Since stablecoins are the most used quoted currency on centralized and decentralized exchanges, the growth in their market cap can be considered a proxy for investor demand.
The stablecoin aggregate supply has increased since Oct. 2023 and is near its all-time high of $162.9 billion.
Interestingly, the supply (red) increased during the ongoing Bitcoin market cap decline in March 2024. This is primarily due to the growth in USDT (green).
So, it is safe to say that these stablecoins are not used to purchase Bitcoin. However, if deployed, they will also have more purchasing power.
Stablecoin Supply Ratio
The Stablecoin Supply Ratio measures the ratio between Bitcoin’s and Stablecoin’s supply. It’s calculated by dividing the BTC market cap by the Stablecoin market cap. The lower the value, the more purchasing power stablecoins have over BTC.
The indicator also uses the Bollinger Bands indicators to determine when the SSR moves outside its normal range. Historically, movements below the lower Bollinger Band (black circle) have led to a considerable BTC price increase.
In September, the SSR indicator briefly fell below the lower Bollinger Band. This will lead to a substantial BTC move if it follows previous history.
The SSR Oscillator is an indicator derived from the SSR. It uses a 200-day moving average of the SSR and quantifies how that moves inside the Bollinger bands.
Because of the growing stablecoin supply and the relatively constant BTC price, the SSR oscillator fell to a low of -2.27 in September.
Similarly to the SSR indicator, such low values have often led to upward movements (black circle), though the signal is not as clear in the oscillator as in the indicator.
This is because one false signal transpired in June 2022.
The Stablecoin Supply has been growing much faster than Bitcoin’s market cap. So, stablecoins have much more buying power when purchasing BTC. Historically, this has led to Bitcoin’s upward movement of size.
Disclaimer:
The information provided in this article is for informational purposes only. It is not intended to be, nor should it be construed as, financial advice. We do not make any warranties regarding the completeness, reliability, or accuracy of this information. All investments involve risk, and past performance does not guarantee future results. We recommend consulting a financial advisor before making any investment decisions.
Valdrin Tahiri is a cryptocurrency analyst and reporter at CCN, specializing in technical analysis with a focus on Elliott Wave theory, on-chain metrics, and fundamental research. He brings over seven years of experience in the crypto space as both a trader and writer.
He discovered cryptocurrencies in 2017 while earning his MSc in Financial Markets at the Barcelona School of Economics, which sparked a deep interest in blockchain and market dynamics. Since then, he’s contributed to top crypto outlets like BeInCrypto and CoinGape.
Valdrin also served as Community Manager of BeInCrypto’s Telegram group for three years, helping grow it into one of the largest crypto communities worldwide. His expertise in market structure and price patterns allows him to break down complex trends into clear, actionable insights.
He’s published thousands of articles covering altcoins, Bitcoin cycles, and macro trends.
