Understanding what drives Bitcoin’s price is crucial for investors. Cryptocurrency expert Ali Martinez has shed light on this by using the basic economic principles of supply and demand.
Supply and Demand Basics
Like any asset, Bitcoin’s price is influenced by the relationship between supply and demand. When supply exceeds demand, prices tend to fall. Conversely, when demand outstrips supply, prices typically rise.
Martinez’s Analysis
Martinez analyzed Bitcoin’s price using supply and demand principles and other metrics. He found that fluctuations in buying interest and Bitcoin availability significantly impact its price.
Realized Cap and Long-Term Holders
In March, Bitcoin’s Realized Cap surged when it hit a record high of $73,000. This suggested that many long-term holders were selling their gains. As a result, prices fell sharply.
After the sell-off, long-term holders bought over 70,000 BTC, indicating confidence in the asset’s value.
Short-Term Holders and Volatility
When Bitcoin’s supply exceeded demand, it corrected from $73,000 to $57,000. This drop pushed Bitcoin below its Realized Price for short-term holders, causing fear in the market.
However, the Short-Term Holder Realized Price at $65,500 served as an accumulation point.
Market Dynamics and Future Outlook
Martinez believes Bitcoin’s upward trajectory will continue when demand exceeds supply.
BTC on Exchanges
The amount of BTC on crypto exchanges can support the supply and demand principles. In May, over 30,000 BTC were moved to private wallets, indicating long-term storage and confidence in Bitcoin’s value.
MVRV Extreme Deviation Pricing Bands
Martinez also uses the MVRV Extreme Deviation Pricing Bands to assess Bitcoin’s price. A retracement above the +0.5σ pricing band at $64,600 has historically led to a test of the 1.0σ range at $77,000.
Current Market Situation
Bitcoin is currently trading at $66,275, up over 5% in the past week. Trading volume has declined by 24%, while market cap has increased by 0.23%.
