Bitcoin is experiencing a positive trend in its price performance, attributed to a surge in stablecoin “buying power” and an increase in their supply.
Glassnode’s on-chain analytics data reveals a continuous decline in the stablecoin supply ratio (SSR) oscillator, a key stablecoin metric. The SSR oscillator tracks the ratio between Bitcoin’s market cap and the combined value of all known stablecoins, serving as a proxy for the supply/demand dynamics between BTC and USD.
The decline in SSR values, from a record high of 4.13 on Oct. 25 to 0.74 on Jan. 22, indicates that stablecoins possess greater purchasing power to acquire the Bitcoin supply.
Analyzing the stablecoin market cap changes, James Van Straten, a research and data analyst at CryptoSlate, highlights a supply boost starting in Q4 2023, which has continued into the current year.
The stablecoin supply has risen by $10 billion since the recent low, marking a 3.5% increase in the past 30 days. This surge is attributed to the introduction of spot Bitcoin exchange-traded funds (ETFs), enabling institutional capital flows into the U.S. market for the first time.
Furthermore, a significant “rebalancing” is underway, driven by the conversion of the Grayscale Bitcoin Trust (GBTC) into an ETF. This shift has triggered a substantial rebalancing event, impacting on-chain flows three weeks after the ETF launches.
While these redemptions persist, forecasts suggest a rapid reduction in volumes in the near future, alleviating sell-side pressure. Glassnode’s “The Week On-Chain” newsletter notes that institutional flows are on the rise, contributing to increased on-chain volumes amid the ongoing market dynamics.
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