With just 164 days left until the next Bitcoin halving event, Bitcoin (BTC) is trading at a 17-month high, while a spot Bitcoin exchange-traded fund (ETF) is expected to be approved in the coming months.
However, amid Bitcoin’s 106.38% year-to-date gain, the Stablecoin Supply Rate Oscillator (SSRO) has raised an important signal, suggesting that a new bull cycle has begun.
Stablecoin purchasing power wanes ahead of Bitcoin ETF arrival
this Stablecoin Supply Ratio IndicatorData from Glassnode shows that the index, an important indicator of the dominance of stablecoins relative to Bitcoin, surged to a record high of 4.13 on October 25. This surge hints at the massive interest in on-chain Bitcoin accumulation.
However, this also shows that the purchasing power of stablecoins is at a relatively historical low.
Historically, this is the highest SSRO divergence since 2019, when it surged to 4.12 on June 26, exactly 320 days before the May 2020 halving.
Therefore, the same top signal in SSRO this week may precede the retracement period before the next halving event in April 2024.
Still, while relative purchasing power is currently weak, and a local top like the one seen in 2019 is certainly possible, the larger implication is that high SSRO levels are also consistent with the start of a larger bull cycle.
‘Reserve Risk’ Shows Bitcoin’s Rally Could Be Different
As potential Bitcoin ETF spot approval impacts the market and has an impact on BTC’s price, one indicator is painting a unique picture of market sentiment, suggesting this Bitcoin rally may be different from 2019 .
That is reserve risk (RR) index, measuring the risk-reward incentives associated with current “HODL Bank” and spot BTC prices. As Glassnode said:
When confidence is high and prices are low, investment risk/reward is attractive (reserve risk is low). When confidence is low and prices are high, the risk/reward is unattractive (reserve risk is high). “
When SSRO accelerated to similarly high levels in June 2019, RR followed suit, climbing above the green band, as shown in the chart above.
However, with SSRO readings currently at record highs, RR remains at multi-year lows at the bottom of the green range. Historically, buying Bitcoin when the RR is at such low levels (i.e. a large long-term holding bank relative to the current BTC price) has produced huge returns.
This also means that although Bitcoin prices are at 17-month highs, confidence in Bitcoin’s future price performance remains very high.
Therefore, long-term holders may be well-positioned to reap significant gains, given that these entities control an all-time high total supply.
Considering the potential billions of dollars in inflows into Bitcoin ETFs, it’s easy to see why Six-figure Bitcoin price predictions are becoming increasingly common after the halving.
This article does not contain investment advice or recommendations. Every investment and trading activity involves risks, and readers should do their own research when making decisions.
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