Tether Ratio Channel

23 ago

Tether Ratio Channel is an on-chain metric that tracks the ebb & flow of the ratio of BTC market cap / stablecoin market cap.

This ratio is relevant to traders, as it tends to lead total crypto market cap's short to medium term trend, and has for many years.

The ratio's most straightforwards visualization may be Stablecoin Supply Oscillator, a legacy on-chain metric that captures the ratio but isn't useful on its own as a trading tool.

Tether Ratio Channel builds on top of Stablecoin Supply Oscillator, to create a new metric that's:

• Signal-generating, with clear entry & exit signals
  
• Unambiguous, so use is mechanical
  
• Optimized, with the intent to generate signals as close as possible to BTC local tops & bottoms
  
• Normalized across its history, so each signal has a rich uniform history & context
  

METRIC CONSTRUCTION

Tether Ratio Channel is a higher timeframe RSI of Stablecoin Supply Oscillator, bound inside a bollinger band channel, normalized and smoothed for optimal signal clarity.

Instead of chart price as the source, the metric uses a proxy for stablecoin market cap:
(USDT + USDC + DAI) divided by BTC mkt cap

But it's named for Tether specifically, because USDT just completely dominates the asset class.

Default settings are very close to the on-chain metric original, but not identical. Settings are adjustable in the metric inputs.

VERTICAL LOCATION IN THE CHANNEL

The lower the yellow print is on the metric's Y-axis, the more upside potential total crypto market cap typically has.

The higher the yellow print is on the metric's Y-axis, the more downside risk most crypto assets typically have.



SWING TRADE SIGNALS

Tether Ratio Channel is signal-generating, a simple cross of the metric (the yellow line) and its weighted moving average (the white line) is the signal.

• A bullish cross below the green horizontal target is a high conviction buy signal
  
  
• A bullish cross above the green target is a lower conviction buy signal, but historically still tends to make for a good entry
  
  
• Any bearish cross is typically a good time to take profits
  
  
• Any bearish cross above 55 (on the metric's Y axis) tends to coincide with BTC local tops
  

• Buy signals are visualized with a green vertical, and a background fill that persists until the next sell signal
  
  
• High conviction buy signals (below the green line) also print an arrow, if enabled.
  

Background fills and arrow prints will only appear if the chart timeframe is equal to or lower than the 8H chart. (Or whatever the metric's timeframe input is set to, if the user changes default settings).