Analyst Willy Woo explained the reason for bitcoin’s resilience to the downward pressures of the crisis unleashed by FTX. The traders who have brought the most liquidity and leverage to bitcoin are long-term savers, who are not willing to «give up their BTC,» Woo said this Sunday, December 4, on his Twitter account.
«If you’re wondering why BTC is holding out for so much deleveraging, it’s the long-term hodlers, […] Who are not giving up their BTC, who are absorbing the sales. Buying spot and adding BTC to their stack.» stated Woo.
In the graph below, Woo shows the bitcoin price (blue) in conjunction with the evolution of the bitcoin supply shock (green). In this context, supply shock manifests itself when a significant decrease in supply is revealed to the market.
Bitcoin price from 2019, in contrast to supply shock. Source: @woonomic on Twitter.
To generate the supply shock curve, Woo proposes. three methodswhich result in similar curves. In general, the supply shock is the ratio of unavailable supply to available supply. The first group is associated with long-term savers, who mostly hold their BTC themselves. The second group is predominantly made up of traders who buy and sell.
If the supply in the hands of savers with little willingness to sell increases, there will be less BTC left in the hands of speculative, buy-and-sell traders. This leads to an increase in liquid supply shock, Woo points out. The less BTC available for buying and selling, the greater the supply shock, and thus the price tends to rise.
This would be the main reason for bitcoin’s positive returns in the past two weeks, after the BTC price suffered a significant drop in early November, caused by the FTX liquidity crisis.
While November closed in the red for bitcoin, as reported by CryptoNews, the last 15 days have seen a significant rebound. From the yearly low of USD 15,506 on November 21, to a price of USD 17,199, at the time of writing, bitcoin has appreciated 10.9%.