On-chain data shows that the bitcoin exchange stablecoin index has plummeted to its lowest level since March 2023. Here's what this could mean for btc.
The share of bitcoin exchange stablecoins has been declining recently
As explained by an analyst at CryptoQuant Quicktake mail, the bitcoin exchange stablecoin index has been declining recently. The “Stablecoin Swap Ratio” is an indicator that tracks the ratio between the bitcoin swap reserve and stablecoins.
The exchange reserve here is the total amount of a given cryptocurrency that all centralized exchanges have in their wallets at the moment. Generally, this part of the supply found on these platforms is considered the available commercial supply of the asset.
However, what the trend of this indicator may imply for the market depends on the exact type of cryptocurrency in question. In the case of volatile assets like bitcoin, investors can transfer to these platforms whenever they want to sell.
As such, an increase in the exchange reserve may imply that the available selling supply of the asset has increased, which could naturally prove bearish for the price.
For stablecoins, exchange deposits also imply that investors want to exchange these coins for other assets or fiat money. However, the difference is that a stablecoin shift towards other cryptocurrencies is bullish for their prices as this exchange obviously acts as buying pressure for them.
For this reason, the total exchange reserve of all stablecoins is often considered the buying supply available for the volatile side of the cryptocurrency sector.
Now, here is a chart showing the trend in the bitcoin exchange stablecoin index over the past few years:
<img decoding="async" class="aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/03/Bitcoin-Stablecoin-Ratio-at-1-Year-Lows-Why-This-is-Bullish.png" alt="List of bitcoin Exchange Stablecoins” width=”1280″ height=”806″ data-recalc-dims=”1″/>
The value of the indicator appears to have been riding a downtrend in recent days | Source: CryptoQuant
As shown in the chart above, the bitcoin exchange stablecoin index has been declining for some time now, but the indicator's bearish trend has especially sharpened recently.
When this indicator has a low value, it means that the btc exchange reserve is low compared to that of all stablecoins at the moment. Since this may correspond to the “sell bid” of the asset being lower than the “buy bid”, the indicator assuming such a value may be bullish for btc.
According to this indicator, the possible selling pressure in the market had peaked in mid-2023, but has been declining since then. So far, the metric has retreated to levels seen in March 2023.
The indicator's latest values are still high compared to those seen during the 2022 bear market lows, but the fact that they are only going down may be an optimistic sign.
That said, in the current post-ETF environment, it is unclear how relevant foreign exchange reserves (and therefore the indicator) are now, as ETFs offer a different route into bitcoin, for which demand has been significant so far.
btc Price
Since its initial surge past the $70,000 mark, bitcoin has been stuck in consolidation for the past few days as it still trades around this level.
<img loading="lazy" decoding="async" class="alignnone size-medium aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/03/Bitcoin-Stablecoin-Ratio-at-1-Year-Lows-Why-This-is-Bullish" alt="bitcoin price chart” width=”1534″ height=”854″/>
Looks like the price of the coin has gone stale over the past few days | Source: BTCUSD on TradingView
Featured image from Shutterstock.com, CryptoQuant.com, Chart from TradingView.com
