Bitcoin made it to the $13,000 level again. A supply shock theory and the halving suggests that the next important bull cycle could be about to begin. It is clear that Bitcoin has been in its most bullish state for 16 months, and it has a short way to breaking the 2019 price peak, which could lead to a significant upside.
Since the same time last weekend, the crypto asset went up 15 percent, outperforming most other cryptocurrencies. Market dominance has also made it to a three-month high of around 62 percent, TradingView reports.
Halving Supply Shock
Analysts and chart expert Willy Woo has noted that we are now five months past the halving. He also said that this was the amount of time in previous cycles that it took for supply stocks to make the Bitcoin price surge into the next cycle.
A timely explainer on Bitcoin halvenings, and supply shock.
It’s timely because we are now 5 months past the halvening; in the last cycle that was roughly the time needed for the supply shock to cause BTC price to teleport upwards into a full on, FOMO induced, bull run. https://t.co/vhz4GYATMR
— Willy Woo (@woonomic) October 25, 2020
The concept is built on the hypothesis that the Bitcoin halving event, which took place in mid-May, makes the new supply to be cut in half. But net demand stays the same, so from then on, a supply-shortage gathers.
The model was discussed by Twitter user ‘Croesus’ [@Croesus_BTC], who said:
“As market participants bid for significantly reduced ‘available for sale’ supply, price drifts upwards. In a typical market, this induces new supply production to increase and selling from existing holders to increase.”
He added that due to Bitcoin’s features as a startup store of value, most people do not have major positions in it yet, which makes the price and demand increase. New demand increases faster than ‘HODLers’ are willing to sell, resulting in a sharp increase in the supply shortage accumulation rate.
The analyst concluded that a craze phase then ensues, which ends when HODLers’ willingness to sell inverts demand: “I believe this is the signal underneath the noise — the mechanics at the heart of how halvings drive 18-month parabolic bull markets.”