Bitcoin [BTC] bulls exhibited resilience during the weekend, bouncing back from a decline at $52K. As leveraged positions continue to experience volatility, the support from significant holders is becoming increasingly essential.
Miners, among these significant holders, tend to either give up or hold onto their assets during extended periods of negative market sentiment.
For a potential supply shock to materialize, several key elements must align, as identified by CryptoCrypto. This alignment could result in a surge in prices due to a tightening supply in the market.
BTC Miners Back Supply Crunch as Whales Withdraw
From an economic perspective, a notable crunch in BTC supply could be a pivotal trigger for a price adjustment. To witness a supply crunch, miners need to move past the distribution phase.
Essentially, if miners reduce their BTC sales, the impact of the supply shock could intensify.
An interesting observation from the chart illustrated below is the recent crossover of the 30-DMA above the 60-DMA, issuing a hash ribbon buy signal.
This signal hints at a potential bullish market trend, strengthening the likelihood of a price shift driven by miner accumulation.
Currently, the total BTC circulating supply stands at 19.7 million. Miners possess 1.8 million BTC, accounting for around 9.1% of the overall supply.
Meanwhile, the percentage of BTC held by whale-associated wallets has dropped from 24% during BTC’s testing of the $73K limit to 21.9% at present.
The decrease signals a decline in the concentration of large BTC holdings, according to CryptoCrypto.
Although miner reserves have shown resilience, the regular deposits made by whales have reduced the likelihood of a supply shock. Yet, a shift in this scenario could occur if demand surpasses the selling pressure.
As BTC bulls uphold the price above the $51K support threshold, there exists a potential for a complete turnaround if buying momentum strengthens.
If this increased buying activity sustains the supply tightness, an actual supply shock might materialize. The determining factor will be whether demand consistently outstrips the available supply.
The MVRV Chart indicators..
Historically, the MVRV Z-Score has proven effective in identifying phases where the market value significantly surpasses the realized value.
Notably, when the Z-Score (depicted as the orange line) enters the pink zone, it often signifies the peak of a market cycle. This indicator has historically pinpointed market peaks within a span of approximately two weeks.
Conversely, when the Z-Score enters the green area, it indicates potential undervaluation of BTC. Buying BTC during these periods has often yielded significant returns.
Hence, a seasoned trader would monitor the market bottom to identify the optimal opportunity to “buy the dip.”
This trend is evident in the bull runs that typically follow each market bottom performance.
Simply put, the demand is unlikely to exceed the supply unless the bottom phase is tested. In essence, CryptoCrypto suggests that a reversal seems improbable without substantial holding data, diminishing the likelihood of a recovery.