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Exchange Stablecoin Ratio (ESR) as a Leading Indicator
Bitcoin's early 2023 has been phenomenal in terms of price action, propelling the leading cryptocurrency to a 71 percent ascent. In a bigger picture, bitcoin should be considered as an asymmetric investment, offering limited downside with a significant unlimited upside. The recent dramatic market volatility is reflected in bitcoin’s relation to its realized price (purple), from which the spot price (white) took a strong rebound on March 10th. Now the spot has already reached the level of May 2022, clearly turning away from the realized price surface. The realized price has been seen as market's watershed, as it represents the average price of all bitcoin purchases. At the same time, the spot exceeding the realized price shows that bitcoin investors are making a profit on their investments. Praeterea, the exchange stablecoin ratio (red) (ESR) is currently acting as a leading indicator to bitcoin, and other digital assets in correlation. The ESR and bitcoin's spot price (turquoise) converged from 2021 to 2022, however the last year's selling pressure broke their correlation. Pivoting its path back in late 2022, the exchange stablecoin ratio is again reaching towards new highs. In the current market structure, the ESR acts as a magnet to bitcoin's spot price, and their divergence will shift into a convergence over time. I expect these two indicators to be more correlated in future, as bitcoin moves forward in its pre-halving accumulation cycle.