The real reasons for the strong bitcoin rally in October 2021 were sustained buying and accumulating the coin, a report said, adding that the constant buying accumulated to cause a rally in prices.

A report from the US-based crypto exchange Kraken cited that long-term bitcoin holders and crypto miners have been just collecting the coin with no reaction to its price drop. It monitored the on-chain data and used it in the report called ‘Shocktober’.

This constant hoarding of bitcoin has created a “supply shock” in the market, leading to a continued upsurge in bitcoin prices.

The October 2021 rally of bitcoin has been something of a milestone, rising about 50 percent to a record high of approximately $66,936. The coin had closed September on a bearish note at almost $43,000 which is a 7.34 percent fall as compared to the start of the month.

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However, the October rally sustained throughout the month till the coin found its stable benchmark at $60,000. Some of the chief reasons attributed to the rise of bitcoin prices were inflation concerns, increased regulatory clarity, and SEC approval to Bitcoin futures ETF.

According to Shocktober, prepared by the research and intelligence department of Kraken, even as bitcoin prices are high, several smallholders and crypto miners are profit-booking. Along with this, the big holders and miners continue to buy and accumulate bitcoin. This indicates that bitcoin prices will continue to rise in the coming weeks and months.

The Kraken report also mentions a few metrics to support their observation. According to the report, the metric (1-year revived supply) that reflects coin movements from long-term holders has seen a fall to the lowest level in the past 2 months ever since August 2021. The report also indicated that the bitcoin holders are not booking profit from the ongoing rally.

It notes that big miners, including Bitfarms, Hut8, and Riot, have continued accumulating bitcoin rather than selling it. This has been their activity even during unfavourable periods such as the September sell-off. These miners are “stockpiling” the bitcoin they receive in exchange for their services.

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While big miners have maintained or increased their holding during the past two months, small miners who have made profit-booking are seen unloading their profits back into the market. The report notes that if the trend continues, there could be a bigger supply shock in store a few months down the line.

The market examiners have also cited that they believe that the long-term holders see further upside heading into the New Year.

Furthermore, the report also notes that the average weekly holdings of whales – holders of 100 or more bitcoins – rose to 0.25 percent from the early October level. It stands at approximately $724 billion by the end of October 2021.

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(Edited by : Yashi Gupta)