Bitcoin ‘supply shock’ pushes price higher as investors refuse to sell in anticipation of new record highs

Crypto forums propose ‘No Sell November’ and urge others to ‘HODL’

Bitcoin is limited in supply to 21 million coins (Getty Images)

Bitcoin investors are creating a “supply shock” by stockpiling the cryptocurrency in anticipation that the record-breaking price rally is not yet over, according to a new report.

Crypto research firm Kraken Intelligence attributed bitcoin’s recent all-time high to this phenomenon, warning that long-term holders are continuing to accumulate BTC rather than taking profits, thus pushing the price up even higher.

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Bitcoin’s supply is limited to 21 million coins, with new coins created through a process known as mining. Roughly 18.5m bitcoins have already been mined, however data suggests that more than a third of the circulating supply is currently controlled by long-term holders, meaning they hold significant sway over the market.

“Despite the latest rally, our findings indicate there has been little profit-taking from long-term holders,” Kraken Intelligence’s October 2021 Crypto On-Chain Digest states.

“This means larger market participants have grown increasingly more confident, preferring to accumulate further... The supply shock brought by long-term holders last month has only grown stronger this month.”

Kraken analysts claim recent price crashes are a result of a “market retracement rather than a full-blown trend reversal”, with on-chain metrics suggesting that the bull run is not yet finished and new record highs can be expected before the end of 2021 – reinforcing a popular price prediction model that sets bitcoin on a path to reach six figures by Christmas.

“Healthy network activity, coupled with solid long-term holding conviction, institutional miner demand, and rising prices, provides strong confirmation of the trend and highlights strong demand for BTC,” the report states.

Alongside long-term holders and bitcoin miners refusing to sell their cryptocurrency, retail investors are also calling for people to “HODL” next month as part of a proposed “No Sell November” that could pump the price even higher.

“Both large-scale entities and smaller players appear to be stockpiling bitcoin,” Pete Humiston, manager at Kraken Intelligence,” said in a statement shared with The Independent, adding that the recent exodus of miners from China to the US has led to fresh funding in the space.

“We can not only interpret the recent surge in bitcoin mining investment as a further signal of rebounding confidence in the cryptoasset space, but also argue that a resilient mining sector reinforces the network’s overall resilience, vis a vis, the primary value proposition of bitcoin itself.”