- On-chain data suggests that a supply shock appears to have caused the price of Bitcoin to soar over 50% in October.
- “There has been little profit-taking from long-term owners” of BTC, according to a new Kraken report.
- The miners are also storing bitcoin, which helps create a supply shock that fuels higher prices.
A supply shock appears to have helped BTC price appreciate more than 50% in October, a new report from Kraken Intelligence shows. Kken’s October 2021 Bitcoin On-Chain Digest, titled Shocktober, sheds some light on the Bitcoin network participants and their behavior.
The study found that there was “little profit-taking” from long-term Bitcoin holders in this month’s price rally. Coupled with Bitcoin’s limited and programmatic mining rate, it appears there has been a supply shock this month that has caused BTC to hit a new all-time high.
In addition to users HODLing their coins, Bitcoin miners also don’t sell their stacks as “miner supply points to hold more mining pools,” the report said. Although small individual miners made “a relatively modest profit,” big players in the industry are very reluctant to give up the rewards they deserve.
On the other side of the microeconomic chain, demand has only grown. Although higher prices generally lead people to offer more and less demand in broad economic activities, the Bitcoin market appears to have its own rules. The inelastic supply of BTC leads to an exploding demand as older players refuse to sell and new entrants bid the price higher.
“By confirming the uptrend and highlighting the strong demand for BTC, the excitement in the market is reflected in several metrics and indicators,” the report said. “The renewed demand for BTC becomes more and more apparent when you look at active addresses, new addresses, transaction numbers, speed and other metrics.”
As both users and miners grow in understanding of Bitcoin, the natural path is to HODL. The asymmetrical benefits of holding a programmatically scarce asset like BTC cause all market participants to abstain from selling, effectively creating a supply shock that drives prices higher over time.
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