It seems that Bitcoin is seldom showing its determination. Bitcoin, which had moved sideways from $59,800 per piece last week, fell to the $53,200 level based on Binance, a cryptocurrency exchange, and then rose to close to $60,000, and as of the 21st, it again reached $56,000. Sat down.
Let’s turn the clock. Just three months ago, I was able to buy bitcoins at around $20,000 each. Looking at the price trend, the changed atmosphere is more clearly visible. Bitcoin, which has risen by as much as 20% a day for three months, has been rising without hesitation, is struggling with 60,000 dollars. It feels too early to judge it as a bearish market, and the upward pressure is clearly weak to call it a bullish market. Why is Bitcoin showing this movement?
It is the supply and demand within the cryptocurrency exchange that determines the price of Bitcoin. As you know, there are two ways to buy bitcoins on an exchange. It is to buy with local currency such as dollar (USD) or won (KRW) of each country, or with stable coins such as Tether (USDT) or USDC (USDC).
As mentioned in previous articles, the recent rise in the price of Bitcoin was led by US institutional investors. This is why dollar-based supply and demand is very important, and it is important to look at the premium index of Coinbase, the largest USD-based exchange in the United States.
Coinbase premium has always been high when it first crossed the $20,000, $30,000, $40, and $50,000 mark in the past, but when it broke through the $60,000 mark, it showed a negative premium, the lowest this year. . This is because the rise was due to the stablecoin buying trend, not the purchase of whale investors who traded in dollar on Coinbase.
If the recent rise is attributable to the stablecoin buying trend, you should look at the stablecoin supply and demand situation. When looking at the supply and demand of stable coins, there are two main things to check. The first thing to look at is the change in the ratio of bitcoin and stablecoin in the exchange, and then the change in the market cap of stablecoin versus the bitcoin market cap.
The graph on the top left is the’Stablecoins Ratio (USD)’ chart provided by CryptoQuant. It is the value obtained by converting the amount of bitcoin held by major global exchanges into dollar value and dividing it by the amount of stablecoin holdings of the exchanges.
Looking at recent on-chain data, the balance of stablecoins on the exchange, which can be seen as buying pressure, continues to hit an annual high, and the balance of bitcoins on the exchange, which can be seen as selling pressure, is not increasing. Nevertheless, the index of’stablecoin ratio of all exchanges’ is high. This means that the amount of stablecoins in the exchange is not enough to boost the price of bitcoins. The red line on this chart must move sideways or fall to increase the likelihood of Bitcoin price going up.
One thing to note when checking this indicator is that only spot exchange data should be checked separately. On spot exchanges, the only thing you can do with stablecoins is to buy other coins, such as bitcoin, but on derivatives exchanges, since they are used for various purposes such as margin futures trading, the remaining amount of stablecoins is used to measure the pressure to buy bitcoins. Not suitable
In fact, when looking at the stablecoin ratio of recent derivatives exchanges, it appears significantly lower than that of spot exchanges. These data act as noise when we predict Bitcoin price trends.
The graph on the top right is a chart of the’Stablecoin Supply Ratio (SSR)’ provided by CryptoQuant. It is the value obtained by converting the bitcoin market capitalization into dollars and dividing it by the stablecoin market cap. Nowadays, there are cases where the newly issued stablecoins are not deposited directly on the exchange, so comparing them with the market capitalization can be seen as a more leading indicator. SSR also maintains a fairly high figure compared to last year, similar to the above-mentioned’stablecoin ratio of all exchanges’ indicators.
The grayscale Bitcoin trust (GBTC) premium, which indirectly affects the price of bitcoin, and the bitcoin premium of QBTC, a Canadian bitcoin fund, are also negative compared to last year, recording an annual low. On the 17th, Cryptoquant CEO Ki-young Ju posted a tweet related to these indicators.
I think $BTC would take some time to get another leg up in terms of demand/supply.
1/ Too many $BTC holdings in USD compare to stablecoin holdings on spot exchanges.
2/ BTC market cap is too big to get another leg up by leveraging stablecoin market cap solely. pic.twitter.com/daXPaKU3U1
— Ki Young Ju Ki Young (@ki_young_ju) March 17, 2021
What choices should investors make in front of these indicators? If you are a cryptocurrency investor who mainly invests in the medium to medium term, you may want to stop trading for a while until the coinbase premium increases significantly and the stablecoin supply appears. Whether buying in dollars or stablecoins, the price of bitcoin rises only when buyers appear. As at the end of last year, the bull market, where the price of bitcoin rises by 20% a day, will be difficult to reappear until the supply and demand improves.
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