Demand for Bitcoin (BTC) has been in a bear market all year, but the rally is likely to lead to a new price rally.
This is what the well-known economist Lynn Alden says, who this week during a discussion on Twitter focused on increased demand and price growth for bitcoins.
Back: See supply and demand for bitcoin price signals.
In response to a survey conducted by stock-to-flow models PlanB, Alden said that a change in demand is more likely to trigger a BTC price boom than various other events favored by bulls.
These include US approval of a spot-based exchange-traded fund, the country that tracks El Salvador as a legal tender for bitcoin, advances in the Lightning Network and the damaging effects of the recent Bitcoin Taproot upgrade.
Bitcoin poll on Twitter (screenshot). Source: PlanB / Twitter
Instead, Alden agreed with Blockstream CEO Adam Buck that major changes will come as a result of the positive feedback between supply and demand.
Buck described the process as “supply pressure as multiple currencies move into cold storage, purchases continue, prices rise, and then a reflex hunt.”
“Reflexivity” refers to a mutually beneficial relationship between fundamentals and market expectations when an asset begins to move, leading to stronger and stronger results.
However, by analyzing current supply and demand, Alden emphasized that 2021 has done little to change the status quo since the first quarter.
“BTC has been in a bear market in terms of demand since the first quarter of 2021, when ARKK reached its peak again,” she claims, along with data from network analysis firm Glassnode.
“But the supply has been unusually tight this cycle, which has caused the price to rise unexpectedly and even reach new small heights at some point since then. Dry ignition, no spark.
Annotated chart showing an active bitcoin. Source: Lyn Alden / Twitter
“Uncertain monetary policy” prevents trend reversal
As Cointelegraph reported, Alden is not the only market commentator looking at supply factors to burn the Bitcoin fire this year.
About the topic: Bitcoin will be stronger after shares fall by “10% -20%” – Bloomberg analyst
Even in the short term, a small increase in demand may change direction as foreign exchange reserves fall and long-term owners control a share of the total bitcoin supply that is approaching all-time highs.
The analyst said this week that the result may be a move similar to October 2020 – the starting point for BTC / USD to surpass the all-time high since 2017.
In response to Alden, renowned trader and analyst William Clemente said he “completely agrees” with this view.
“The show side looks good and the holding behavior is strong,” was part of his message.
“The qualitative view of bitcoin flows mostly in favor of the bulls, and the problem is weak demand, probably due to uncertainty in monetary policy.”