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Glassnode data was analyzed with CryptoSlate shows that investors are confidently holding Bitcoin and Ethereum, more so than stablecoins, during the current risk-off environment
As previously mentioned, billions of stablecoins have been redeemed for fiat in recent months. A significant factor in this was Binance’s FUD bankruptcy, which sparked a run on the exchange.
However, as FUD dies down, on-chain metrics show the purchasing power of Bitcoin and Ethereum, relative to stablecoins, is rising.
The purchasing power of BTC & ETH is increasing
Stablecoins fulfill many functions, including facilitating increased on/off and serving as a store of value, particularly in Southern Hemisphere countries which typically experience high inflation.
The chart below shows the change in purchasing power of stablecoins over 30 days on exchanges. It works by taking into account the supply of the top four stablecoins, USDT, USDC, BUSD, and DAI, then subtracting the USD currency change in BTC and ETH exchange flows over that period.
The charting in green shows the increasing volume of stablecoins flowing into the exchange relative to the flows of BTC and ETH. This indicates that stablecoin-denominated purchasing power is greater than that of BTC and ETH.
Conversely, the red chart signifies a decline in stablecoin volume relative to BTC and ETH. In other words, the purchasing power of BTC and ETH is greater than that of stablecoins.
The orange bars refer to the positive 30-day USD volume of BTC and ETH, which is when stablecoins convert to BTC and ETH instead of USD.
Typically, during risk-off sentiment, stablecoins increase in volume as investors move to minimize the impact of price volatility. But the chart below shows investors acting contrary to expectations by increasing the inflows of BTC and ETH to the exchange.
The last time this happened was in October, for a short time. Notably, the current volume dominance of BTC and ETH exchanges over stablecoins has extended for roughly seven weeks at this point. This shows confidence in the top two tokens holding the current price level.
Stablecoin Bitcoin Supply Ratio
The Stablecoin Supply Ratio (SSR) metric refers to the proportion of Bitcoin supply to stablecoin supply, denoted in BTC.
A high SSR indicates the potential for low buying pressure and is considered bearish. On the other hand, a low SSR means that there is a high potential for buying pressure to make this situation bullish. When SSR is low, the current stablecoin supply has more “buying power” to buy BTC.
The chart below shows SSR breaking the upper bound for the first time since January 2021, which coincided with BTC’s move to $65,000. A previous example of breaking the cap was in July 2019, when BTC soared to $14,000 after a market low of $3,300.
The above suggests a bullish tailwind, despite the current risk-off environment.
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