Bitcoin (BTC) is currently trading at 17-month highs, with just 164 days remaining until the next Bitcoin halving event. There is also anticipation of the approval of a spot Bitcoin exchange-traded fund (ETF) in the coming months.
However, despite Bitcoin’s year-to-date gains of 106.38%, the stablecoin supply rate oscillator (SSRO) has raised concerns, suggesting the beginning of a new bull cycle.
Stablecoin buying power weakens ahead of Bitcoin ETF
The stablecoin supply ratio metric, which measures the dominance of stablecoins versus Bitcoin, has surged to a new all-time high of 4.13 on Oct. 25, according to data from Glassnode. This surge indicates a significant appetite for Bitcoin accumulation on-chain.
However, this also suggests that the purchasing power of stablecoins is relatively low compared to Bitcoin.
This is historically the highest SSRO divergence since 2019, when it reached 4.12 on June 26, 320 days before the May 2020 halving.
The emergence of this same signal on the SSRO this week could indicate a retracement period before the next halving event in April 2024.
Nevertheless, while the buying power is currently weak, the larger implication is that high SSRO levels have aligned with the start of bigger bull market cycles.
“Reserve risk” suggests this BTC rally may be different
As a spot Bitcoin ETF approval is being anticipated, a metric called the reserve risk (RR) indicator provides a unique perspective on market sentiment, suggesting that this Bitcoin rally could diverge from the one in 2019.
The RR indicator measures the risk-reward incentives in relation to the current “HODL bank” and spot BTC price. When confidence is high and price is low, there is an attractive risk/reward to invest (Reserve Risk is low). When confidence is low and price is high, the risk/reward is unattractive (Reserve Risk is high).
In June 2019, when the SSRO reached similar high levels, the RR also climbed above the green band as shown in the chart. However, despite the current record-high SSRO reading, the RR is at multiyear lows at the bottom of the green band.
Buying Bitcoin when the RR is at such low levels has historically resulted in significant returns, indicating that confidence in Bitcoin’s future price performance remains high despite its 17-month high.
Long-term holders, who currently control an all-time high of the total supply, may be well-positioned for substantial gains. Additionally, the potential inflow of multibillion-dollar investments into a Bitcoin ETF further supports the growing predictions of a six-figure BTC price in the post-halving period.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.