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An event is occurring that favors the price of bitcoin, and this analyst explains it



Key facts:
  • According to Woo, long-term bitcoin savers are absorbing the selling pressure.

  • In the past 15 days, bitcoin has risen 10.9 percent despite the bear market.

Analyst Willy Woo explained the reason for bitcoin’s resilience to the downward pressures of the crisis triggered by FTX. The traders who have brought the most liquidity and leverage to bitcoin are long-term savers who are unwilling to “give up their BTC,” Woo said on his Twitter account on Sunday, December 4.

“If you are wondering why BTC resists deleveraging so much, it is the fault of the long-term hodlers, […] who do not give up their BTC, who absorb the sell-off. By buying spot and adding BTC to their stack.” stated Woo.

In the graph below, Woo shows the price of bitcoin (blue) along with the evolution of the bitcoin supply shock (green). In this context, supply shock occurs when a significant decrease in supply is revealed to the market..

Price of bitcoin (blue) in relation to the evolution of the supply shock.
Price of bitcoin since 2019 in contrast to the supply shock. Source: @woonomic on Twitter.

To generate the supply shock curve, Woo proposes. three methodsthat result in similar curves. In general, supply shock is the ratio of unavailable supply to available supply.. The first group consists of long-term savers, who mostly hold their BTC personally. The second group consists mainly of traders who buy and sell.

If the supply in the hands of unwilling savers increases, there will be less BTC left in the hands of speculative traders, who buy and sell. This leads to an increase in liquid supply shock, Woo points out. The less BTC available for buying and selling, the higher the supply shock and thus the price tends to rise.

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This would be the main reason for bitcoin’s positive returns in the past two weeks, after the price of BTC dropped significantly in early November due to the FTX liquidity crisis.

While the month of November closed in the red For bitcoin, as reported by CryptoNews, the past fortnight has seen a significant rally. From an annual low of US$15,506 on November 21 to US$17,199 at the time of writing, bitcoin has appreciated by 10.9 percent.

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