For analysts and investors alike, understanding the variables that influence price action in the complicated world of cryptocurrency markets is indispensable. Recently shared by Ali Martinez, a well-known cryptocurrency expert observations to Bitcoin price fluctuations by applying basic economic theory of supply and demand.
Understanding Bitcoin prices through supply and demand
It is worth noting that the price movement of any asset, including cryptocurrencies, is determined by the basic principles of supply and demand. The price of an asset tends to fall when supply exceeds demand, while prices tend to rise when supply does not keep up with demand.
This is how Ali Martinez deduced the price of crypto assets and the behavior of their holders by applying this method and other on-chain indicators. Martinez’s analysis shows how market shopping interest and availability fluctuate Bitcoin are key factors influencing the price trajectory.
According to Martinez, Bitcoin’s realized capitalization saw a significant augment in mid-March when BTC reached a recent all-time high of $73,000. This indicated that most long-term BTC holders were likely profitable at the time.
As a result, several investors sold their shares, which resulted in a pointed augment in realized profits. After taking profits in March, long-term holders felt protected adding 70,000 BTC to your investments at these prices.
Meanwhile, as Bitcoin’s increasing supply in the market exceeded demand, the coin experienced significant growth adjustment from $73,000 to $57,000.
Given that short-term holders are more likely to sell their shares due to price volatility, this decline caused Bitcoin to fall below the realized price for short-term holders, creating fear in the market. However, despite investor concerns, the tiny holder’s realized price of $65,500 acted as an accumulation point.
Based on this principle, Martinez believes that the likelihood of Bitcoin’s uptrend continuing will only augment when demand for the cryptocurrency begins to exceed the supply of BTC available in the market.
Using BTC on exchanges to support policies
Martinez emphasized that available BTC on cryptocurrency exchanges can be used to confirm these laws of supply and demand. He further noted that in May, over 30,000 BTC were moved to private wallets for long-term storage, indicating holders’ confidence in Bitcoin’s potential value.
I’m watching Bitcoin price using MVRV Extreme Deviation price bands, Martinez reported a correction above the +0.5σ price band at $64,600. Such growth has historically seen BTC test the 1.0σ price range, which is supported by rising demand. Meanwhile, that price range currently remains at $77,000.
Bitcoin is currently trading at $66,275, showing an augment of over 5% over the past week. Although prices are rising, trading volume has fallen by 24% and market capitalization has increased by 0.23%.
Featured image from iStock, chart from Tradingview.com
