During the halving event, there was much talk about the crypto market facing a supply shortage, which would push up the price of crypto. But now, it’s the opposite situation. The market is experiencing an overhang of bitcoins. Why was the balance not reached and what will happen to the excess bitcoins on the market? And what consequences will this lead to?
Indeed, after the halving, we are seeing an unexpected dynamic. The market has its own breathing rhythm, so everything has its own time.
The integration of bitcoin into the traditional financial system through derivatives has significantly complicated the situation. Incorrect use of leverage leads to sharp price fluctuations due to liquidations of positions. This creates additional volatility, which can mask fundamental supply and demand factors.
Investors are now very sensitive to external factors. Even though bitcoin is often positioned as "digital gold" and an inflation hedge, we can see that it still correlates strongly with traditional financial markets. Fed decisions, geopolitical events, and the overall stock market sentiment continue to exert a significant impact on the bitcoin price.
Furthermore, let's not forget that investors would like to buy bitcoin at a cheaper price. This creates a paradoxical situation: the more people believe in the long-term potential of bitcoin, the more they can restrain its short-term growth, waiting for more favorable entry prices. In addition, the actions of large players and miners can actually give rise to short-term price fluctuations that do not always reflect the actual balance of supply and demand.
Also, the role of algo trading cannot be underestimated. Automated trading systems can amplify trends and create moments of excess supply or demand that are not necessarily related to fundamental factors.
The balance was not achieved due to the complex interaction of all the factors listed above. Expectations of a deficit after the halving were based on a simplified model that does not factor in the complexity of the modern crypto market. The excess number of bitcoins in the market will probably be gradually absorbed, but this may take longer than expected.