Report: Bitcoin Miners, Long-Term Holders Creating BTC Supply Shock

Although small miners realized “a relatively modest amount of profit” in October, big players in the industry aren’t selling.

  • On-chain data suggests a supply shock appears to have led the bitcoin price to surge over 50% in October.
  • “There has been little profit-taking from long-term holders” of BTC, a new Kraken report found.
  • Miners are also stockpiling bitcoin, helping create a supply shock fueling higher prices.

A supply shock seems to have contributed to the BTC price appreciating by more than 50% in October, a new report by Kraken Intelligence shows. Kraken’s October 2021 Bitcoin on-chain digest, entitled Shocktober, sheds some light on the overall Bitcoin network participants and their behavior.

There has been “little profit-taking” from long-term bitcoin holders along with this month’s price rally, the study found. Paired with Bitcoin’s limited and programmatic mining rate, a supply shock appears to have ensued this month, fueling BTC to reach a new all-time high.

In addition to users HODLing their coins, bitcoin miners are also not selling their stack as “miner supply points to further holding amongst mining pools,” per the report. Although small individual miners realized “a relatively modest amount of profit,” big players in the industry are very reluctant to let go of their earned rewards.

On the flip side of the microeconomic string, demand has only grown stronger. Although higher prices generally lead people to supply more and demand less in broad economic activities, the Bitcoin market seems to have its own set of rules. The inelastic supply of BTC leads to a skyrocketing demand as older players refuse to sell and new entrants bid the price higher.

“Validating the uptrend and highlighting strong demand for BTC, the excitement in the market is evident across several metrics and indicators,” the report said. “Renewed demand for BTC is increasingly clear when looking at active addresses, new addresses, transaction count, velocity, and other metrics.”

As users and miners alike grow in understanding of Bitcoin, the natural path is to HODL. The asymmetric benefits of holding a programmatically scarce asset like BTC incentivize all market participants to refrain from selling it, effectively triggering a supply shock that pushes prices higher over time.

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Publication date: 
10/28/2021 - 16:30
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