Bitcoin (BTC) continues to surge, reaching 17-month highs as the market eagerly awaits the next Bitcoin halving event in just 164 days. Additionally, there is growing speculation surrounding the approval of a Bitcoin exchange-traded fund (ETF) in the coming months. However, despite the strong gains of Bitcoin this year, the stablecoin supply rate oscillator (SSRO) has raised some concerns about the buying power of stablecoins.
The SSRO, which measures the dominance of stablecoins compared to Bitcoin, recently hit an all-time high of 4.13 on October 25th. This indicates a significant appetite for on-chain Bitcoin accumulation, but it also suggests that the purchasing power of stablecoins is at a relative all-time low. This is the highest SSRO divergence since 2019, which preceded a retracement period before the previous halving event. Therefore, the current SSRO signal could potentially indicate a similar retracement before the next halving event in April 2024.
Despite the weak buying power of stablecoins, high SSRO levels have historically aligned with the start of larger bull market cycles. This suggests that although a local top like in 2019 is possible, the overall implication is that a bigger bull market may be on the horizon.
Another metric that provides unique insight into market sentiment is the reserve risk (RR) indicator. This indicator measures the risk-reward incentives in relation to the current “HODL bank” and the spot BTC price. The RR is currently at multiyear lows despite the record-high SSRO reading. Buying Bitcoin when the RR is at such low levels has historically resulted in significant returns. This means that despite the current high price of Bitcoin, confidence remains strong in its future performance.
Long-term holders of Bitcoin are in a favorable position to reap major gains, as they currently hold an all-time high percentage of the total supply. Additionally, the potential influx of billions of dollars into a Bitcoin ETF further supports the optimistic outlook for Bitcoin’s price. As a result, post-halving price predictions of six-figures are becoming increasingly common.
It is important to note that this article does not provide investment advice or recommendations. Every investment decision carries risks, and individuals should conduct their own research before making any financial decisions.
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