The growth in the number of new users keeps the bullish picture, says Woo. Although long-term investors continue to accumulate BTC, the market is not aware of this situation.
The price of Bitcoin (BTC) has been experiencing sideways movements, but the data on the blockchain shows bullish characteristics, Willy Woo noted. Long-term investors continue to accumulate BTC, but the market is not aware of it, thus generating a supply shock, the analyst said.
According to Woo, this divergence should cause the Bitcoin market to rise as he considers this an excellent opportunity. In the fourth quarter of 2020, the network went through a similar experience as the market witnessed a significant decrease in supply.
Setback in the Price of Bitcoin Tests New Holders
Woo defines this scenario as a shakeout of weak hands since the price pulled back to test new holders. When the price starts to drop, new buyers sell out of fear while experienced investors buy cheaply. Since the latter often have access to sources of capital, their purchases cause a rapid rebound in price.
When sales are strong, a quick V-shaped recovery is impossible, Woo argued. Therefore, it is necessary to invest time to re-accumulate the coins poured into the market. The analyst said that this results in a prolonged sideband called the accumulation floor.
At the end of bearish markets, the so-called peak pain typically forces late investors to look for intelligent buyers. Woo noted that the latter would intervene to buy at realization prices.
Bitcoin Exchanges Are Between Strong Hands and Weak Hands
Willy Woo stated that long-term holders are absorbing speculative currencies very quickly. The data consistently indicates that an accumulation floor is forming.
Regarding a possible further collapse in the price to USD 20,000, Woo emphasizes that fundamentals point to a bullish outlook.
A supply shock is quietly building, but the market is not aware of it, Woo said. In other words, long-term holders are absorbing the currencies that went from whales (strong hands) to speculators (weak hands).
The Growth in the Number of Users Reaches a Maximum
Data from Glassnode suggests that 32,000 users are currently entering the network daily, representing a new high.
The growth in the number of new entities results from subtracting the users leaving the network (empty their wallets) from the number of users, Woo explained.
In 2017, new users stopped arriving, which made a rise in the price of Bitcoin possible. Currently, new users are taking advantage of this opportunity to buy, reaching the highest rate of 2021.
Pressure from the Chinese authorities has caused the hash rate of the network to decline, Woo argued. However, the recent historical decrease in difficulty could allow the price to recover and establish a floor in the price of Bitcoin.
The decrease in the supply seems to be leading the price of the pioneering cryptocurrency to resume its bullish trend. Long-time investors who accumulate Bitcoin would benefit from this opportunity as they could sell at a higher price.
By Alexander Salazar
