On-chain data shows the recent rise in the price of Bitcoin above the $30,000 mark may be fueled by stablecoins being shifted into the asset.
Stablecoins Have Continued To Flow Into Bitcoin In Recent Days
As pointed out by an analyst on Twitter, stablecoins flowing into BTC could be another catalyst behind the recent jump. The relevant indicator here is the “stablecoin supply ratio” (SSR), which measures the ratio between the market cap of Bitcoin and combined market cap of the stablecoins.
Generally, investors use stables when they want to escape the volatility associated with most other assets in the market. When such investors who have taken shelter in stablecoins eventually feel that prices in the volatile markets are right to jump back in, they shift the stables back into their desired coins, thus providing a buying pressure to their prices.
Because of this reason, the supply of these fiat-tied tokens can be thought of as the available buying supply for other cryptocurrencies like Bitcoin and Ethereum.
Now, since the SSR compares the BTC supply with that of the stablecoins, it can help us know the relative potential amount of buying power for BTC that’s available in the sector currently.
The below chart shows the trend in the Bitcoin SSR over the last year.
Looks like the value of the metric has gone up in recent days | Source: James V. Straten on Twitter
When the Bitcoin SSR has a low value, it means the market cap of Bitcoin is low compared to that of the stablecoins right now, and hence, a large amount of buying pressure may be available in the market.
On the other hand, the indicator having a high value suggests the current stablecoin supply doesn’t have too much buying power available to purchase BTC.
From the chart, it’s apparent that the SSR had sharply risen to a pretty high value when BTC had broken above the $28,000 level. This suggests that investors were possibly deploying their stablecoin reserves into the asset to fuel the rally.
After the break, however, the asset had been stuck in consolidation for a few weeks around this level. While this was happening, though, the SSR had been constantly declining, implying that some fresh stablecoin gunpowder was accumulating in the market.
In the last few days, as the cryptocurrency’s price has risen above the $30,000 level, the SSR indicator has also once again shot up. This pattern may mean that it was the stables that had piled up in the market that were behind this latest leg up in the rally.
Naturally, the higher the SSR goes, the more likely BTC gets to a top as the buying pressure runs dry. But since the metric was able to hit even higher values during the surge above $28,000, it’s possible that the cryptocurrency could have more room to grow before a high is hit.
At the time of writing, Bitcoin is trading around $30,400, up 8% in the last week.
BTC has risen in the last few days | Source: BTCUSD on TradingView