JAN3 CEO and Bitcoin bull Samson Mow believes that Bitcoin will see a significant supply shock in the coming days that could potentially cause its price to surge to $1 million within a matter of ‘days or weeks.’
The forecast hinges on a perceived supply shock driven by demand from the recently approved Bitcoin ETFs and a series of market adjustments currently unfolding.
Supply shock
The launch of Bitcoin ETFs has already attracted billions in trading volume. Concurrently, BlackRock’s acquisition of 11,500 BTC has notably reduced the available market supply within the first two days of trading.
The purchase is equivalent to buying 13 days’ worth of Bitcoin supply, which currently stands at around 900 BTC/day. Experts predict that the demand for BTC will rise exponentially, especially if the ETFs continue to see significant inflows.
Based on CryptoSlate’s analysis of the available BTC supply, if institutions continue to buy BTC at a similarly aggressive rate, it would only take around 120 days for the supply to dry up, making Bitcoin more scarce than it has ever been in its history.
Adding complexity to the market dynamics is the upcoming Bitcoin Halving, an event that historically impacts the price significantly by reducing the rate at which new BTC are created. The reward for mining new blocks will be halved to 3.125 BTC from 6.25 BTC in approximately 90 to 120 days.
This, combined with the existing demand exceeding supply, could lead to an unprecedented price surge as demand hits new record highs, while supply drops to its lowest level in history.
Max pain theory
Mow believes that markets will likely follow the “Max pain theory” — adapted from traditional financial markets, it suggests a scenario where Bitcoin’s price movements could result in the maximum financial loss for the largest number of market participants.
The theory, though not formally defined in the realm of crypto, typically refers to the price level at which most options contracts expire worthless, causing significant losses to holders. In Bitcoin’s case, this could translate into rapid and extreme price fluctuations, potentially catching many traders and investors off guard.
Mow believes that one key aspect of this theory in the Bitcoin market is the potential for a short squeeze in the coming days. A short squeeze occurs when the price of Bitcoin unexpectedly surges, forcing those who bet against it (short sellers) to buy back at higher prices to limit losses, further driving up the price.
The concept of max pain also ties into the unpredictability of Bitcoin’s price movements and market psychology. Bitcoin has a history of defying conventional market expectations, and a scenario that causes the maximum financial pain to the most significant number of market participants is consistent with its volatile and unpredictable nature.
According to Mow, a quick rise to $1 million would disrupt the strategic plans of many, including nation-states and companies looking to invest in Bitcoin. It could also affect the usability of the Lightning Network due to high fees and break the Stock-to-Flow (S2F) model that many use to predict Bitcoin’s value.
Among the most significant impacts would be on the legacy financial system, which Mow believes is unprepared for a rapid reorganization around Bitcoin.
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