The data indicates that Bitcoin (BTC), currently at the $11,350 level, is preparing for a new price increase caused by stablecoin investors accumulating cheap coins.
On August 26th, highlighting the latest results of the stablecoin supply ratio (SSR) parameter, the on-chain monitoring resource Glassnode predicted a positive movement for BTC/USD.
Stablecoin supply ratio „3 times stronger“ compared to July 2019
SSR refers to the potential purchasing power of stablecoins on Bitcoin. Bitcoin’s low prices allow stablecoin owners to buy a larger portion of BTC’s offer. This demand drives the price of the crypto asset upwards, given its predictable and verifiable supply and its high stock-to-flow ratio.
When the price rises, stablecoins, which always remain at the same valuation as the fiat currency to which they are pegged, can buy a smaller portion of BTC’s supply.
The ability to open a position in BTC is called „buying power. Currently, this purchasing power is high, so stablecoin holders can buy a relatively large portion of the offer.
„SSR is 3 times stronger than the last time BTC reached these price levels, more than a year ago,“ commented Glassnode.
In another tweet, the company added that the largest stablecoin, Tether (USDT), was visibly ready to enter such positions.
„The argument is further supported by the increase in the $USDT (ERC-20) balance on exchanges over the past year – indicating that the stablecoins are waiting on the sidelines.
Comparative chart between Bitcoin and stablecoin supply ratio
Are Tether owners ready to join BTC?
As reported by Cointelegraph, in July Tether’s market cap reached the $10 billion mark. In terms of average daily trade value, this month USDT has surpassed both Bitcoin Rush and PayPal.
Tether’s market cap vs. Bitcoin price
One of the motivations behind the increase in the offer and, consequently, the market cap of a stablecoin is to allow investors who have bought other assets to collect the profits by converting them into a stable asset. As explained by Glassnode in a blog post about SSR published in December, the increase in the price of BTC, for example, leads to an increased need for stablecoin.
„The resulting lack of liquidity in the stablecoin offering makes it more difficult for investors to close profitable positions,“ the article summarized, concluding:
„To compensate for the lack of purchasing power caused by Bitcoin price increases, new fiat currency must be introduced into the market, so the stablecoin offer must increase.