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On-chain data shows the ‘Exchange Stablecoins Ratio’ for Bitcoin has shot up recently. Here’s what it could mean for the asset’s price.
Bitcoin Exchange Stablecoins Ratio Has Broken Above 5
As explained by an analyst in a CryptoQuant Quicktake post, the Bitcoin Exchange Stablecoins Ratio has registered an increase alongside the latest rally in the cryptocurrency’s price.
The Exchange Stablecoins Ratio here refers to an on-chain indicator that keeps track of the ratio between the Exchange Reserves of BTC and the stablecoins. The “Exchange Reserve” is naturally the total amount of the asset that’s sitting in the wallets of all centralized exchanges.
When the value of the indicator goes up, it means the Exchange Reserve of BTC is rising relative to that of the stablecoins. On the other hand, it going down implies stables are becoming more dominant on these platforms.
The Exchange Reserve of both of these asset classes represents something different with respect to the wider sector. In the case of Bitcoin (and other such volatile assets), the Exchange Reserve can be looked at as a measure of the available selling pressure in the market.
This is because of the fact that holders usually deposit their coins to these platforms when they intend to trade them away. The same remains true for the stablecoins as well, but since their price is ‘stable’ by nature, selling from investors has no effect on it.
While the selling of stablecoins doesn’t have any effect on their own price, it does hold implications for the volatile side of the market, if the stables are being swapped in favor of tokens like BTC.
The assets being purchased using stables naturally feel a bullish effect on their price. As such, the Exchange Reserve of the stablecoins may be considered as a representation of the buying pressure in the sector.
Now, here is a chart that shows the trend in the Bitcoin Exchange Stablecoins Ratio over the last few months:
As is visible in the above graph, the Bitcoin Exchange Stablecoins Ratio has been going up recently, a sign that investors have been depositing BTC at a faster rate than stablecoins. The metric is currently sitting at a value of 5.3, which suggests the BTC Exchange Reserve is more than five times that of the stablecoin one.
This may be a bearish development for the cryptocurrency, as it implies the potential selling pressure in the sector notably outweighs the buying pressure that stables can bring.
As the quant says,
This surge above the 5.0 threshold echoes the late-January peak near 6.1, which preceded a swift correction—implying traders may be gearing up to rotate BTC back into cash.
It now remains to be seen whether the Bitcoin rally would be able to keep going regardless of this trend or not.
BTC Price
Bitcoin has taken to sideways movement during the past few days as its price is still floating around the $103,500 mark.
Featured image from Dall-E, CryptoQuant.com, chart from TradingView.com
Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.
Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.
In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.
Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.
Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..
Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.
Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.
As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.
Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.
Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.
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