Supply shock is something that market might not be ready for
The famous supply shock that some investors feared and others expected came closer as the illiquid supply shock ratio is on a strong uptrend year-to-date.
What is a supply shock, and why does it matter?
Supply shock is an unexpected spike in the demand for a commodity or an asset that highly overexceeds the available supply. In terms of commodities, supply shock is usually considered a negative thing that often plays out against consumers.
But in the case of digital assets like Ethereum or Bitcoin, we might consider a supply shock to be a good thing for investors because it often causes an asset’s value to spike.
Illiquid Bitcoin supply
As Blockware analyst Will Clemente noted, Bitcoin is being constantly absorbed by entities with a history of low spending of their BTC. If the major part of the supply is being held by wallets that tend to hold BTC instead of spending it, the available supply for new traders will decrease over time.
According to the data provided, the average volume bought by traders and investors has decreased over time due to both the increase in the price of digital gold and the decrease in supply.
Another factor that directly affects the size of the illiquid supply on the market is the exchange outflow rate, which remained relatively high for BTC in the last few months as whales finally redistributed the majority of their holdings at the top.
At press time, Bitcoin is trading at $40,610 after climbing over 4% yesterday. But despite the positive short-term performance, the top cryptocurrency is still trading within the ascending range formed since mid-February.