06.12.2021

Stock-to-Flow Model and SSR Indicate Bitcoin’s Record Undervaluation

The Stock-to-Flow (STF) model points to a record undervaluation of Bitcoin (BTC), and the SSR (Stablecoin Supply Ratio) indicator is at an all-time low, falling below the bottom of the Bollinger Band for the 4th time in 3 years.

STF is showing the 2nd largest record deviation on record.

On-chain SSR indicator went below the lower border of the Bollinger Band.

SSR is at an all-time low.

Stock-to-Flow Model

STF deviation is the difference between the bitcoin (BTC) rate and the STF model.

Values ​​greater than 1 (red line) indicate that Bitcoin is overvalued relative to the model. On the contrary, values ​​below 1 (green line) signal undervaluation.

The current record low for this on-chain indicator was registered in November 2010 at around 0.3 (black arrow). Subsequently, in July 2017, the indicator reached 0.36 (black circle).

Now, as a result of the recent drop in bitcoin, the STF deviation value was 0.314, which was the lowest in the last ten years.

Thus, according to the STF model, the current BTC rate reflects the extreme undervaluation of the currency.

Bitcoin Stock-to-Flow Model Shows BTC Undervalued

Ratio of supply of stablecoins to BTC

The stablecoin supply ratio (SSR) is the ratio of the supply of stablecoins to the current supply of bitcoin. It is interesting because traders often use fiat-backed stablecoins to buy (or sell) bitcoins.

Low SSR values ​​traditionally indicate high purchasing power of stablecoins relative to Bitcoin. So, a value of 5 indicates that stablecoins can buy 20% (1/5) of the total BTC supply.

If the supply ratio of stablecoins declines, this could potentially indicate the likelihood of an appreciation of the bitcoin rate.

The SSR indicator has been updating all-time lows since May 17 when it reached 9.4 for the first time, absorbing the previous record of 9.57 from October 2020.

On June 26, SSR moved its all-time low to 5.56. We also note that for the fourth time since October 2018, the indicator sank below the lower border of the Bollinger Band.

The previous three times (highlighted in circles), the market then formed a bottom and launched a significant increase. Accordingly, if history repeats itself again, Bitcoin may soon enter a growth phase.

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