Bitcoin’s Bullish Momentum and Stablecoin Supply Ratio
Bitcoin (BTC) is currently experiencing a surge in price, reaching 17-month highs. With only 164 days left until the next Bitcoin halving event and the possibility of a Bitcoin exchange-traded fund (ETF) approval on the horizon, there is growing anticipation in the crypto market.
However, amidst Bitcoin’s impressive year-to-date gains of 106.38%, there is a concerning signal coming from the stablecoin supply rate oscillator (SSRO). This metric, which measures the dominance of stablecoins compared to Bitcoin, has reached an all-time high of 4.13 on October 25th. While this suggests a strong appetite for Bitcoin accumulation on-chain, it also indicates that the purchasing power of stablecoins is at a relative all-time low.
This divergence in the SSRO is reminiscent of a similar pattern observed in 2019, which preceded a retracement period before the halving event in April 2020. However, historically, high SSRO levels have also marked the beginning of larger bull market cycles.
The Unique Signal from Reserve Risk
As the possibility of a spot Bitcoin ETF approval excites the market and influences BTC’s price, another metric called reserve risk (RR) provides insight into market sentiment. The RR indicator evaluates risk-reward incentives based on the current “HODL bank” and spot BTC price.
In previous instances where the SSRO reached high levels like in June 2019, the RR also increased and surpassed the green band. However, despite the current record-high SSRO reading, the RR remains at multiyear lows within the green band. Historically, buying Bitcoin when the RR is at such low levels has resulted in significant returns.
This suggests that despite Bitcoin’s current price surge, confidence in its future performance remains high. Long-term holders, who currently control an all-time high of the total supply, may be well-positioned for substantial gains.
Hot Take: Potential for Six-Figure BTC Prices
With the potential influx of billions of dollars into a Bitcoin ETF, combined with the bullish momentum and strong market sentiment, it is increasingly common to hear predictions of six-figure BTC prices in the post-halving period. This aligns with the notion that long-term holders are in a favorable position to reap significant rewards.
Overall, while there are signals suggesting a retracement period and weaker buying power of stablecoins, the larger implication is that Bitcoin’s current rally may mark the beginning of a major bull market cycle. As investors await the upcoming halving event and potential ETF approval, the outlook for Bitcoin remains highly optimistic.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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