Key Points
- BTC miners are showing resilience, potentially leading to a supply shock in the cryptocurrency market.
- However, the lack of a clear market bottom reduces the impact of miner efforts.
Bitcoin [BTC] bulls demonstrated their strength over the recent weekend, bouncing back from a dip at $52K. The ongoing volatility in leveraged positions makes the support from large holders increasingly important.
These large holders often include miners, who usually either capitulate or HODL during extended bearish periods. Thus, for a supply shock to occur, several key factors must fall into place. If these conditions are met, a potential price surge could follow due to the tightening supply in the market.
Miners Support, Whales Retreat
From an economic perspective, a significant crunch in BTC supply could be a key catalyst for a price correction. For a supply crunch to materialize, miners must transition past the distribution phase. Simply put, if miners offload less BTC, the supply shock could become more pronounced.
Interestingly, recent data shows that the 30-DMA has moved back above the 60-DMA, generating a hash ribbon buy signal. This suggests a potential bullish trend, reinforcing the possibility of a price correction driven by miner accumulation.
Currently, the total circulating supply of BTC stands at 19.7 million. Miners hold 1.8 million BTC, which is approximately 9.1% of the total supply. However, the proportion of BTC held by whale cohort wallets has decreased from 24% when BTC tested the $73K ceiling, to 21.9% at present.
This decline indicates a reduction in the concentration of large BTC holdings. While miner reserves have remained resilient, these routine deposits by whales have lessened the likelihood of a supply shock. Nevertheless, a turnaround is still possible if demand outweighs the selling pressure.
Understanding the MVRV Chart
The MVRV Z-score has historically been effective in identifying periods where market value is unusually high above the realized value. When the Z-Score enters the pink box, it often signals the peak of a market cycle. Conversely, when the Z-Score enters the green box, it suggests that BTC may be undervalued. Buying Bitcoin during these periods has historically yielded outsized returns.
Therefore, an advanced trader will monitor for the market bottom to identify the optimal “buy the dip” opportunity. Without sufficient holding evidence, the chances of a rebound diminish.
