A recent run-up in the Bitcoin market could exhaust due to limited demand for the cryptocurrency at current levels, says Ki-Young Ju, chief executive at CryptoQuant, a South Korea-based blockchain analytics platform.

The on-chain analyst anticipated declines for the benchmark cryptocurrency after assessing its reserves against available stablecoin Treasurys across all the leading exchanges. Dubbed as Stablecoin Supply Ratio (SSR), the indicator pointed to the ratio between the market capitalization of Bitcoin and all stablecoins.

According to CryptoQuant metrics, a lower SSR reflects a higher stablecoin supply on exchanges, meaning traders would use the dollar-pegged tokens to purchase cryptocurrencies, including Bitcoin. CryptoQuant considers it as a bullish indicator.

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Conversely, a lower SSR shows fewer stablecoin across exchanges against a higher Bitcoin supply. Therefore, it increases the sell-off probability in the BTC market, which prompts CryptoQuant to call it a bearish indicator.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin: Exchanges Stablecoin Ratio. Source: CryptoQuant

Of late, the CryptoQuant SSR is rising, raising concerns that Bitcoin may undergo another steep sell-off in the sessions ahead.

“I think Bitcoin would take some time to get another leg up in terms of demand/supply,” SAID Mr. Ju. “First, [there are] too many BTC holdings in USD compare to stablecoin holdings on spot exchanges. Second, [the] BTC market cap is too big to get another leg up by leveraging stablecoin market cap solely.”

More Bearish Indicators

Mr. Ju combined his bearish take on Bitcoin with more depressive indicators, all of them pointing to a brewing downside pressure in the cryptocurrency market.

First, the analyst noted that net US dollar inflows across the crypto exchanges declined recently, pointing that traders ignored buying Bitcoin at its higher high levels. Second, the Coinbase Premium, which compares the difference between the bitcoin price on Coinbase and Binance, was neutral. That reflected lower demand for Bitcoin in the US.

Third, the percentage difference between the Grayscale Bitcoin Trust share and Bitcoin’s spot price slipped into a negative area. That showed institutional investors disinterest in paying a premium over the Bitcoin price—a bearish signal, according to CryptoQuant.

Bitcoin Trusts premium in the US and Canada dip below zero. Source: CryptoQuant

The lower premium was the same for QBTC, which represents the Bitcoin fund in Canada.

Bitcoin Outlook

Bearish on-chain indicators flashed at the time when Bitcoin was dropping lower amid uncertain macroeconomic conditions.

The BTC/USD exchange rate dived up to 12.38 percent from its recently-established record high of $61,788.45 (data from Coinbase). At first, the drop appeared because of a renewed profit-taking sentiment among daytraders. Nonetheless, the sell-off accelerated as yields on the longer-dated US Treasurys rose and pushed the US dollar higher.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin holds support above its 20-day moving average. Source: BTCUSD on TradingView.com

The focus has now shifted to the Federal Reserve’s two-day policy meeting ending Wednesday. Investors anticipate the US central bank chairman Jay Powell to keep their loose monetary policy untouched. Nevertheless, fears over a risk-on market downturn are higher as analysts anticipate that the Fed won’t intervene to contain the rising bond yields.

A higher interest rate could reduce investors’ appetite for Bitcoin.