On-chain Analysis: Stock-to-Flow and SSR Models Show Bitcoin is Undervalued

 


Consider Bitcoin (BTC) on-chain indicators, more specifically Stock-to-Flow (STF) and Stablecoin Supply Ratio (SSR) patterns.

The STF pattern shows the second highest deviation in recorded history, while the SSR has fallen below the lower Bollinger Band for the fourth time in three years.

Stock-to-Flow Model

The STF deviation is the difference between the BTC price and the STF pattern.

A value higher than one (red line) indicates BTC is overvalued relative to the pattern. Conversely, a value lower than one (green line) indicates that it is undervalued.

To date, the lowest value ever recorded in November 2010, is 0.3 (black arrow). More recently, July 2017 has a value of 0.36 (black circle).

However, the recent BTC price drop caused the deviation of the STF to drop to 0.314, the lowest value in about 10 years.

Therefore, according to the STF model, the price of BTC is undervalued at the moment.


Stablecoin Supply Ratio for BTC

The SSR is an index that measures Bitcoin's market capitalization relative to the total stablecoin supply to estimate purchasing power in the stablecoin market. It moves by changing BTC price or stablecoin supply.

Low values ​​suggest that stablecoins can buy a substantial supply of BTC. For example, a value of 5 indicates that 20% of the supply can be purchased with stablecoins (1/5).

The SSR has hit an all-time low since May 17, when it first hit a value of 9.4. This is slightly below the previous all-time low of 9.57, reached in October 2020.

On June 26, the SSR hit a new all-time low of 5.56.

Another interesting development is that the SSR has dropped below the lower Bollinger Band for the fourth time since October 2018.

The previous three times (circles) marked the bottoms before there were significant upward movements.

Therefore, if history rhymes, Bitcoin is likely to start another upward movement soon.

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