Although the price of the first cryptocurrency on the market has fallen, investors continue to accumulate. Woo believes that buyers are entering a zone of maximum accumulation.
Willy Woo reported last week on a bullish on-chain structure for the price of Bitcoin, with expectations of breaking above USD 50,000. The analyst maintains that China’s decision to declare Bitcoin illegal negatively affected the value of the cryptocurrency.
Woo predicts around two weeks of sideways movements between USD 39,000 and USD 47,000. Meanwhile, he argues that it is plausible to wait two or more months of re-accumulation before a bullish rally in the medium term.
The analyst said he adjusted the supply shock curve appearing in the bulletin of September 30th. That shows that a bearish divergence existed when the price of Bitcoin hit USD 53,000 on September 7th. Woo stated that this was evident in that investors were selling as the price rose.
Currently, the price of the cryptocurrency is descending while the supply shock is ascending due to accumulation. That implies that there is less BTC available for sale.
Holders Say that Bitcoin Is on a Discount
A valuation model shows an estimated price at a time when the supply shock had similar values. Blue dots indicate the price for long-term holders, while red dots represent short-term investor valuations.
Long-term investors usually price BTC close to USD 45,000 while short-term buyers value it above USD 50,000. Both values exceed the USD 43,000 price that BTC had at the time of publication of the analysis. That reflects that both groups of investors consider Bitcoin to be at a discount.
Investors Are in an Accumulation Phase
Long-term investors or strong hands currently have two distinctive traits, according to Woo. The first is that they are in a steady accumulation process.
Long-term investors began accumulating after the profit-taking that began with the all-time high in mid-April. Although there is no growth, the flow of accumulated coins remains constant.
The supply shock is a macrocentric metric that tracks coins aged in wallets for more than five months. At that threshold, holders will likely begin to decrease the sale of those coins. Historically, that chart peaks for two months or more before a strong rally occurs, Willy Woo said.
Woo concluded that the fourth quarter of 2021 appears poised for a side accumulation phase. That could happen before a bullish phase later this year and even in 2022.
The analyst said that he would adjust his previous supply shock models. He explained there was an overestimation of some bullish indicators, which will go through adjustments in the future.
The price of Bitcoin recently increased by about 8%, due to statements by the president of the US Federal Reserve, Jerome Powell. The government official stated that the North American country would not ban Bitcoin.
The rally allowed Bitcoin to rise above USD 47,000 again, the level it was on September 20th. The cryptocurrency had that value before the crash of Chinese real estate firm Evergrande took it to USD 43,000. Currently, BTC is trading at around USD 47,914, according to CoinGecko.
By Alexander Salazar