Bitcoin price poised for surge as this key metric falls

Data shows that Bitcoin (BTC), priced at $11,400, is ripe for a new price surge as stablecoin investors buy up cheap stablecoins.

On-chain monitoring resource Glassnode predicts a rise in BTC/USD based on its Stablecoin Supply Ratio (SSR) metric on August 26.

Stablecoin supply ratio is “3 times stronger” than in July 2019

The SSR refers to the potential purchasing power of a stablecoin against Bitcoin. A lower Bitcoin price allows stablecoin owners (e.g. on exchanges) to buy more Bitcoin. This demand drives up the price of Bitcoin because Bitcoin’s supply is predictable, verifiable, and has a high stock-to-flow ratio.

As the price of Bitcoin increases, the amount of Bitcoin that a stablecoin can buy decreases.

The ability to acquire a Bitcoin position is called “buying power,” and currently, purchasing power is high, meaning that stablecoin owners can purchase relatively large amounts of Bitcoin.

“The SSR is 3x stronger than it was a year ago when Bitcoin reached this price level,” Glassnode commented.

In another tweet, Glassnode noted that the largest stablecoin, USDT, is apparently poised to reach this level.

“Further support comes from the increase in USDT (ERC20) on exchanges over the past year, suggesting that stablecoins are sitting on the sidelines.”

Comparison of Bitcoin stablecoin supply ratios Source: Glassnode / Twitter

Are USDT holders waiting to buy Bitcoin?

As Cointelegraph reported, USDT’s market capitalization surpassed the milestone of $10 billion in July. In terms of average daily transfer value, USDT beat Bitcoin and PayPal this month.

USDT market value and Bitcoin price Source: CryptoQuant

One reason to increase the supply, and thus the market cap of stablecoins, is to allow investors who bought other assets to cash out. For example, a rise in the price of Bitcoin requires more stablecoins, Glassnode explained in a blog post about SSR last December.

“The resulting lack of liquidity in the stablecoin supply makes it more difficult for investors holding profitable positions to exit,” the post concluded.

“In order to make up for the lack of purchasing power as the price of Bitcoin rises, new fiat currency needs to flow into the market, which means that the supply of stablecoins needs to increase.”