The price of bitcoin (BTC) is often difficult to predict, especially in the short term. Take, for example, the huge price explosion from $10,000 in September 2020 to $64,000 in March 2021. At the time, we were in the midst of the pandemic and central banks around the world were doing their best to keep the economy afloat. Count the bitcoin there cut in half 2020 and MicroStrategy and the perfect recipe for a bull market is born.
What you also need to know about the 2020 market is that 65 percent of all bitcoins have been in the same address for 1 year or more. In other words, supply was relatively low at a time when demand for bitcoin exploded. Not only MicroStrategy, but also the retail public and institutional investors managed to find bitcoin during this period. The pandemic and excessive printing of money are generating a lot of interest in the absolute scarcity of bitcoin.
The same BTC structure seems to be forming again
At the time of writing, bitcoin is trading at around $47,500 and appears to be forming a similar market structure as it did in 2020. Only once in history has bitcoin held a larger slice of the supply 1 year or more in silence. This was in September 2020. Also, the number of bitcoins on major exchanges such as KuCoin is at its lowest point in 3.5 years. There are only 2.5 million bitcoins available on major exchanges and you should be aware that some people use your bitcoin. caught in the exchanges
#BTC balance on exchanges hit multi-year low, last seen November 2018, 3.5 years ago!
—Patrick Hansen (@paddi_hansen) March 24, 2022
The market is becoming less liquid, while there is huge buying pressure on the Terra price right now. The Do Kwon stablecoin protocol that plans to buy $10 billion worth of bitcoins and currently owns over $1.1 billion worth of bitcoins. It appears that Terra is currently playing the role of MicroStrategy 2020. This is not to say that MicroStrategy is sitting still, because Michael Saylor also borrowed over $200 million this week to buy bitcoin.
The perfect storm seems to be brewing for the market when the hype surrounding bitcoin is virtually non-existent. In recent months, it has been mainly long-term hodlers who have continued to buy quietly. If we break above $50,000 with conviction, then all the circumstances are there for a very interesting 2022 for bitcoin price.
Terra buys 300% of the daily mining production
At the time of writing, the block subsidy for miners is 6.25 bitcoins. That means around 900 bitcoins are released on the market every day. Those 900 bitcoins are worth almost $43 million at a price of $47,500. If Terra buys $125 million worth of bitcoins every day, they alone are buying 300 percent of the miners’ daily output. Add to that Michael Saylor’s MicroStrategy, El Salvador who will no doubt still be buying bitcoin in 2022, all miners who choose to keep their production on board and there is little left for the market.
It seems very likely that we are reaching a point where supply can no longer meet demand. At the moment, the price is slowly rising, but this market structure could result in the price explosions that we have seen for bitcoin over the years. Of course, past performance is no guarantee for the future. The current market is very similar to that of 2020, but at the moment the macroeconomic conditions also play an important role in the future of the price of bitcoin in the short term.
Think, for example, of the conflict in Ukraine, but also of central banks around the world that want to fight inflation with higher interest rates. If you ask me, we are going to have a festive period in the next few months when it comes to the price of bitcoin. But if we have learned anything over the years, it is that the price of bitcoin is difficult to predict in the short term. However, based on the current market structure, it looks great and looks like a new all-time high in the making.
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