Willy Woo’s comparison of Bitcoin and the supply shock indicator shows that the orange coin’s status in the crypto market seems to be undervalued. He posted a detailed analysis of the chart and made predictions for Bitcoin’s future performance.
In recent months, Bitcoin, the biggest digital currency in the world, has been struggling to maintain its status in the market above $50,000. The rising inflation rates, Ukraine-Russia war, and other various factors have deeply impacted BTC’s place in the market.
Although every cryptocurrency is suffering, BTC has suffered the most. Investors are anxiously waiting for the orange coin to rise in the market.
Willy Woo analysis
Willy Woo is a famous figure in the crypto world for his on-chain analysis who recently tweeted about Bitcoin’s status in the market. He said: “the orange coin seems a bit undervalued.”
He has made Bitcoin indicators using blockchain’s direct data. According to this indicator, BTC has downgraded due to being outsold in the market.
Here are some of the important points Willy Woo mentioned in his report:
Supply Shock indicator
Supply Shock is a term given by Willy Woo to explain the concept of demand and supply in the crypto market. He uses the theory in technical analysis for detailed explanations.
In formula terms: Supply Shock = unavailable supply / available supply
Liquid Supply Shock
Within the supply shock indicator, there are various quantitative interpretations. One of them is the liquid supply shock.
The Highly Liquid Supply Shock Oscillator by Willy Woo analyzes the supply shock and sees how Bitcoin performed over the last few months.
He defines liquid supply shocks as: “Coins held by investors with a history of accumulating vs coins held by speculative investors with a history of buying and selling.”
In the form of a formula, it is:
Liquid Supply Shock = Illiquid Coins / (Liquid + Highly Liquid Coins)
High Liquid Supply Shock Oscillator is not a complicated term, it is just Willy Woo’s term for a shock supply indicator that uses the formula of supply and demand to analyze the Bitcoin market. It shows the relative movement in standard deviations from its long-term average.
According to the chart, the oscillator must go in the upward direction as a good sign. However, the chart shows an all-time low (ALT) when BTC price history and oscillator are compared.
Willy sees a strong correlation in the shock supply indicator. He says, “At first glance, you can see the Supply Shock model tracks price quite closely. A closer look shows Supply Shock leads price.”
Further in the report, Willy sketches out 5 cases to show what an oversold BTC looks like in the form of a chart.
Based on the chart, the lows on the supply shock oscillator overlapped with major lows in the price of BTC for cases 1,2, and 4. Although there were lows in these cases, Bitcoin was able to recover from the drop later on.
However, in cases 3 and 5, the BTC price was at the bottom but instead of moving upwards like the other 3 cases, it dropped even lower, as indicated by the orange lines. This shows a clear picture of the BTC prices over time.
Although Bitcoin is the leading cryptocurrency in the world, it still struggles to maintain its place in the market.
Another perspective: Positive Correlation in trends
Even though the chart indicates a downward trend based on Willy Woo’s analysis, it can still lead to a sudden rise in trends after reaching the bottom line for both charts.
In other words, if the liquid supply and BTC price both hit the bottom, they might rise together upwards. This is another perspective of the positive trend correlation based on the historical data. Whenever two trends go downwards, they can move upward eventually.
There are practical examples of these positive correlations and investors can expect the same; however, it is not a confirmed case because anything can happen in the market.
If we compare the two chart instances, the left chart shows an upward trend as a positive correlation when the oscillator and BTC price increased together. The right chart shows a negative correlation between oscillator and BTC price when the supply shock rose but BTC price remained downward, causing a bear market.
In short, nothing can be said about the future of BTC prices moving upwards.
Willy Woo’s detailed analysis gives an insight into the BTC prices. Nonetheless, these comparisons convey that unless the indicator turns back towards the mean, the investors will continue to experience a bearish market.
Currently, BTC is ALT which can signal a bull market, but nothing is confirmed yet. In case the high liquid supply indicator increases without BTC, then the prices are expected to decline even more.
Only the future market will show the movements of Bitcoin in the crypto market.