Bitcoin price is determined ONLY by supply vs. demand. Let's take a look at what that means:
1/3 of the 13.2 million coins mined are lost forever leaving around 9 million (call it the "float"), making the real market cap of BTC around $4.5 billion. BTC trades globally $20 million a day or %0.43 of that. A stock that has similar market cap is GRPN ($4.42 billion), it trades $100 million a day or 2.26% of that in the US stock market. More accurately, GRPN's volume average divided by its float (available freely traded shares) = 3.92% of shares are traded a day. Bitcoin has a daily inflation of 3600 coins or $1.8 million, which equates to about 10% of the daily volume or .04% of the 9 million available coins (this percentage gets smaller every day).
In terms of market cap, BTC is like GRPN in the NASDAQ. However, BTC has a much broader market, multiple exchanges, 24/7 trading, and it only trades 1/5th of GRPN's volume. For this reason and the way it trades, is why I believe BTC's effective "float" is much smaller than 9 million, with the vast majority in HODL mode and effectively out of the supply. This is the reason BTC has been able to sustain such a logarithmic trend. Also, whenever the HODLers dump after a rally, they are absorbed by newborn HODLers and the cycle repeats.
Effectively, BTC's available supply is tiny contrary to what most people believe due to the "$6 billion" market cap. In reality, it takes a small fraction of that to move BTC's price upward, and support is massive thanks to HODLers and wanna-be HODLers trying to accumulate. Every day that goes by and BTC fails to break ~$400 level support, the less likely it will and the higher lows that are put in place.
Lastly, difficulty has never overshot price by so much if ever and the price has never been under the average slope by so much. Along with many other indicators, after 9 months of accumulation (the longest ever) and news, BTC is in cheap territory right now. The weak hands have dumped and new HODLers have emerged as evidenced by an inability to drop below ~$450 for any significant amount of time. The effective supply of people willing to sell is shrinking every day, and I predict the next run up is within 2-3 months.
