Bitcoin Rise Fueled By Stablecoins, On-Chain Data Suggests

(BTC has risen in the last few days | Source: BTCUSD on TradingView)

According to an analyst on Twitter, the recent surge in Bitcoin's price may have been partly fueled by stablecoins flowing into the cryptocurrency. This is measured by the stablecoin supply ratio (SSR), which compares the market cap of Bitcoin with the combined market cap of stablecoins.

Investors often use stablecoins as a safe haven to escape the volatility of other assets. When they feel that the prices in the volatile markets are favorable, they shift their stablecoins back into their desired coins, providing buying pressure to those prices.

The supply of stablecoins can be seen as the available buying supply for other cryptocurrencies like Bitcoin and Ethereum. The SSR helps to determine the potential buying power for Bitcoin in the current market.

When the SSR is low, it suggests that there may be a large amount of buying pressure available in the market. Conversely, a high SSR indicates that there is less buying power available to purchase Bitcoin.

The SSR sharply rose to a high value when Bitcoin broke above the $28,000 level, indicating that investors were deploying their stablecoin reserves into the asset to fuel the rally. As Bitcoin consolidated around this level, the SSR declined, suggesting that fresh stablecoin reserves were accumulating in the market.

In the last few days, as Bitcoin's price rose above $30,000, the SSR indicator also shot up, potentially indicating that the stablecoins that had piled up in the market were behind this latest leg up in the rally.

Although a high SSR may suggest that the buying pressure is running dry, Bitcoin could still have more room to grow before hitting a top, as the metric was able to hit even higher values during the surge above $28,000.