Bitcoin Hits 17-Month High with ETF Approval and Halving Event Looming: Assessing the Stablecoin and Risk Factors
Summary:
Bitcoin (BTC) has reached a 17-month high ahead of the next halving event and possible approval of a Bitcoin ETF. However, the stablecoin supply rate oscillator (SSRO) signals a potential retracement period and a weak buying power of stablecoins. Despite this, the reserve risk (RR) indicator, a measure of risk-reward incentives in relation to the current "HODL bank" and spot BTC price, is still low suggesting a high level of confidence in Bitcoin's future performance.
Bitcoin (BTC) has reached its highest point in 17 months. This surge comes with less than 164 days until the next Bitcoin "halving" (a predefined moment when the rewards for mining new blocks are halved), as well as expectations for the approval of a spot Bitcoin exchange-traded fund (ETF) within the upcoming months. Amidst this, the notable 106.38% annual growth of Bitcoin has shown a significant flag in the stablecoin supply rate oscillator (SSRO), suggesting the onset of a new bullish cycle.
This SSR ratio is an indicator of the performing power of stablecoins compared to Bitcoin. It has shot up to a record high of 4.13 as of October 25, based on Glassnode's data. This climb indicates a strong on-chain drive for Bitcoin accumulation.
Conversely, it also intimates that the buying potential of stablecoins is currently at a historical low. This is the greatest divergence in the SSR since 2019, when it skyrocketed to 4.12 on June 26 — exactly 320 days before the May 2020 halving.
The reappearance of this high signal in the SSR this week may usher in a period of retraction before the upcoming halving event in April 2024. While the relative buying power is presently weak — and a local top similar to 2019 is likely — the broader inference is that elevated SSR levels have coincided with the commencement of larger bullish market cycles.
As the potential approval of a spot Bitcoin ETF stokes market excitement about the impact on BTC's price, the reserve risk (RR) indicator provides a unique picture of market sentiment, hinting that this Bitcoin rally might diverge from that of 2019.
The RR, which assesses the risk-reward trade-offs relative to the current "HODL bank" and spot BTC price, is still considerably low despite the current peak in SSR. Historically, purchasing Bitcoin when the RR is low (meaning a large hodl bank in relation to current BTC price) has yielded substantial returns.
Despite Bitcoin's price hitting 17-month highs, there remains a high level of confidence in Bitcoin's future price performance. Hence, long-term holders may be on track for significant gains, given they currently own a record high of the total supply. Add in the potential for massive dollar inflows into a Bitcoin ETF, and it becomes apparent why six-figure Bitcoin price forecasts for post-halving are gaining popularity. Please note, this article does not offer investment advice or suggestions. Every investment or trading move entails risk, and readers should carry out their own thorough research before making a decision.
Published At
11/1/2023 2:20:00 PM
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