There is more than enough "dry powder" to send bitcoin to new all time highs already in crypto...
Everyone likes to ponder where the next peak will be for bitcoin. People through out numbers like $40k, $70k, $100k and even $288k.
However, rarely does anyone really talk about where all that money is going to come from to push prices up that high.
It's not exactly a 1 to 1 ratio but if the market cap of bitcoin is going to go up up hundreds of billions, we are going to need billions coming into the market.
Where is that money going to come from?
The most popular answer is that it will come from institutions, and there is probably a lot of truth to that...
However, what if I told you that there was already plenty of buying power already in the crypto markets to propel bitcoin well beyond all time highs?
Any idea what I am talking about?
Currently there is more buying power sitting in stable coins than at any other point in bitcoin's history.
Check it out:
(Source: https://studio.glassnode.com/metrics?a=BTC&m=indicators.Ssr)
That pink squiggly line is the one you really want to pay attention to as it represents how much money is sitting in stable coins relative to bitcoin's market cap.
As of right now that number is reading a "15" and in this case a lower number is better.
The calculation for that is simply: BTC total market cap / Stable coin total market cap
That number represents how much of the total bitcoin market the stable coin market could theoretically purchase, and with a score of 15, it means that currently there is enough buying power parked in stable coins to buy up 1/15th of the entire bitcoin market.
Currently there is close to $12 billion sitting in stable coins...
That may not sound like much compared to a $170 billion bitcoin market, but when you consider how little money coming in it actually takes to move bitcoin prices up, there is no doubt in my mind that billions coming in would push prices up easily tens of billions and possibly hundreds of billions when it's all said and done.
Not to mention this would undoubtedly cause money to flood in from other crypto projects as well.
For some reference, back in early 2018, right after bitcoin had peaked and was starting its way down, this metric was reading an 88.
Meaning that there was only enough money parked in stable coins to buy 1/88th of the total bitcoin market.
Based on those two data points, paying attention to that ratio might also give you an indicator when a good time to buy or sell bitcoin.
IE, when the number is small (like it is now), it's probably a decent time to buy as there is plenty of dry powder sitting on the sidelines, and when the number is big (like it was back in early 2018) it's probably a good time to lock in some profits.
If that is indeed the case, bitcoin is a strong buy right now.
Stay informed my friends.
-Doc
Posted Using LeoFinance
thanks for sharing your analysis. I always find them interesting.
Glad you enjoy them. I try to make them informative, applicable to current events, and hopefully easy to understand. :)
thanks, I like your profile and the topics you deal with.
Good deal.
You are right a lot of Stable coins especially tether has been minted in the past few months. The more tether the more rise in Crypto prices we can see.
That is the theory yes.