Bitcoin (BTC) is at 17-month highs with simply 164 days till the subsequent Bitcoin halving occasion, alongside anticipation of a spot Bitcoin exchange-traded fund (ETF) approval within the coming months.
But, amid Bitcoin’s 106.38% year-to-date beneficial properties, the stablecoin provide charge oscillator (SSRO) has raised a serious flag regardless of suggesting the start of a brand new bull cycle.
Stablecoin shopping for energy weakens forward of Bitcoin ETF
This stablecoin supply ratio metric, which acts as an essential measure of the dominance of stablecoins vs. Bitcoin, has surged to a brand new all-time excessive at 4.13 on Oct. 25, in keeping with information from Glassnode. Such a surge hints at a big urge for food for Bitcoin accumulation on-chain.
Nevertheless, this additionally means that the buying energy of stablecoins is at a relative all-time low.
Traditionally, that is the very best SSRO divergence since 2019, when it rocketed as much as 4.12 on June 26 — precisely 320 days earlier than the May 2020 halving.
The emergence of this similar high sign on the SSRO this week might, subsequently, precede a retracement interval earlier than the subsequent halving occasion in April 2024.
Nonetheless, whereas the relative shopping for energy is at present weak — and an area high just like the one in 2019 is actually attainable — the bigger implication is that prime SSRO ranges have additionally aligned with the start of bigger bull market cycles.
“Reserve threat” suggests this BTC rally could also be completely different
As a possible spot Bitcoin ETF approval tantalizes markets with implications for BTC’s value, one metric is portray a novel picture of market sentiment, suggesting this Bitcoin rally could possibly be completely different from 2019.
Particularly, the reserve threat (RR) indicator, which measures the risk-reward incentives in relation to the present “HODL financial institution” and spot BTC value. As Glassnode places it:
When confidence is excessive and value is low, there’s a beautiful threat/reward to speculate (Reserve Threat is low). When confidence is low and value is excessive then threat/reward is unattractive at the moment (Reserve Threat is excessive).”
When the SSRO accelerated to equally excessive ranges in June 2019, the RR adopted go well with, climbing above the inexperienced band, as proven within the chart above.
But, amid the present record-high SSRO studying, the RR continues to be at multiyear lows on the backside of the inexperienced band. Traditionally, shopping for Bitcoin when the RR is at such low ranges (i.e., giant hodl financial institution relative to present BTC value) has produced outsized returns.
It additionally implies that regardless of the Bitcoin value sitting at 17-month highs, confidence stays very excessive in Bitcoin’s future value efficiency.
Thus, long-term holders could also be well-positioned for main beneficial properties, contemplating these entities control an all-time high of the total supply.
This text doesn’t comprise funding recommendation or suggestions. Each funding and buying and selling transfer includes threat, and readers ought to conduct their very own analysis when making a call.