Stablecoin Supply Ratio Oscillator

EliCobra Updated   

The Stablecoin Supply Ratio Oscillator (SSRO) is a cryptocurrency indicator designed for mean reversion analysis and sentiment assessment. It calculates the ratio of BTCUSD 's market capitalization to the sum of stablecoins' market capitalization and z-scores the result, offering insights into market sentiment and potential turning points.

The SSRO is calculated as follows-

method ssro(float src, array<float> stblsrc, int len) =>
    float ssr = src / stblsrc.sum()               // Source of the underlying divided by the sum of stablecoin sources
    (ssr - ta.sma(ssr, len)) / ta.stdev(ssr, len) // Z-Score Transformed

This ratio is Z-Scored to provide a standardized measure, allowing users to identify periods of market fear or greed based on the allocation of capital between the underlying and Stablecoins ( USDT , USDC , TUSD , CRYPTOCAP:BUSD, DAI , USDD , FRAX ). The z-scored values indicate potential areas of discount (buying opportunities) or premium (selling opportunities) relative to historical patterns.

  • Underlying Asset: SSRO is customizable to different underlying assets, offering a versatile tool for various cryptocurrencies.
  • Calculation Length: Users can adjust the length of the calculation, tailoring the indicator to short or long-term analysis.
  • Visualization: SSRO can be displayed as candles, providing a visual representation of premium and discount areas.

Market Sentiment: Lower SSRO values may indicate market fear, suggesting a preference for stablecoins as a relatively safer haven for capital. Conversely, higher values may suggest market greed, as more capital is allocated to the underlying asset.

Utility and Use Cases:
1. Mean Reversion Analysis: SSRO identifies potential mean reversion opportunities, guiding traders on optimal entry and exit points.

2. Sentiment Analysis: The indicator provides insights into market sentiment, aiding traders in understanding market dynamics.

3. Macro Analysis: The majority of cryptos follow \ correlate to BTCUSD , Therefore by assessing premium and discount areas of BTCUSD relative to the chosen underlying asset, users gain insights into potential market tops and bottoms.

4. Divergence Analysis: SSRO divergence from price trends can signal potential reversals, providing traders with additional confirmation for their decisions.

The Stablecoin Supply Ratio Oscillator is a valuable tool for cryptocurrency traders, offering a nuanced perspective on market sentiment and mean reversion opportunities. Its customization options and visual representation make it a versatile and powerful addition to the crypto analyst's toolkit.
Release Notes:
Removed USDD
Release Notes:
improved methodology, added support for plot export to new SuperTrend ToolKit
Release Notes:
Removed BUSD

Open-source script

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